Filing bankruptcy in Charleston, SC, is pretty straightforward. The 2005 Bankruptcy Act set some specific guidelines for the South Carolina bankruptcy process. According to the Act, all individual debtors who file bankruptcy must undergo credit counseling within the six months prior to filing bankruptcy. After the bankruptcy is filed, the individual must complete a financial management instructional course.
Under the 2005 Bankruptcy Act, the debtor will have their income and expenses analyzed to determine if he or she qualifies to file for a Chapter 7 bankruptcy or if a Chapter 13 bankruptcy must be filed. The means testinvolves the court looking at your average income for the six months preceding the filing and compare it to South Carolina’s median income.
If your average income is greater than the median income, the courts will apply the rest of the means test to determine if you can file Chapter 7 or if you must file a Chapter 13. Before you file bankruptcy, you must gather the proper documentation, which includes itemizing your current income sources, any major financial transactions that happened during the last two years, your living expenses, all debts, and all property – not only real estate. You must be able to produce two years of tax returns, real estate deeds, car titles, and any loan documents.
After all the information has been properly gathered, your Charleston bankruptcy attorney will help you determine what property you own is exempt from seizure based on South Carolina exemptions. You or your lawyer will file a two-page petition with several other forms in district bankruptcy court. These documents are called schedules. On these schedules, you list your financial transactions from the last two years and describe your current financial status. Not providing accurate information or not being honest when filing could jeopardize your petition. The cost to file a Chapter 7 bankruptcy is $306. This fee can’t be waived but might be payable by installments. Chapter 13 bankruptcy’s $281 fee cannot be waived.
What Are the Differences Between Chapter 7 and Chapter 13?
If you file Chapter 13, you are repaying your debts through a monthly repayment plan. You must submit a copy of this proposed repayment plan with your petition. After you have paid all your reasonable monthly expenses, you have to show how much money is available to pay toward your outstanding debts and how this money will be divided among the creditors. Secured debts are also called priority claims, include mortgage payments, taxes, and back child support. All priority debts must be paid in full while unsecured debts, such as medical bills, unsecured loans, and credit cards are most likely partially paid.
While it varies, and is dependent upon judgments of those involved in the case, unsecured debts might be paid off at as low as 10% of the face value. Your repayment plan must also pass three tests, which involve making sure it is delivered in good faith, unsecured creditors must be paid as much as if a Chapter 7 bankruptcy was filed which is usually equal to the value of any non-exempt property, and all disposable income must be paid directly into the plan for at least three years. You can extend the plan for up to five years in order to pay unsecured debtors as much as they would receive in a Chapter 7 proceeding.
After filing Chapter 13, you have to start making your monthly payments. These monthly payments are usually withdrawn directly from your paycheck. Your lawyer makes arrangements with the court for this to happen. After your petition has been filed with the SC bankruptcy court, an automatic stay immediately begins to prevent any creditors from making direct contact with you or from making a claim against your property from the date of filing and forward. Any foreclosure proceedings are stopped. The court will take legal control of any of your debts and any property that is not protected by South Carolina exemptions.
The court will appoint a trustee to your case. This trustee will ensure your creditors receive as much pay as possible. Your paperwork will be thoroughly reviewed, especially any exemptions you claim and any assets that you have. The trustee might challenge any part of your case. The 341 Meeting of Creditors will be the first meeting of creditors, which you as the debtor must attend. One or two creditors might attend a Chapter 13 meeting if there are questions regarding the plan or its legitimacy. However, usually a Chapter 7 bankruptcy meeting has no creditors in attendance. Any objections are negotiated between the debtor and the lawyers for the debtor and the creditor. The judge will intervene when a compromise is not made. The creditors meeting takes about five minutes usually. You will be sent a meeting notice, but you can confirm the time and address if necessary by contacting the bankruptcy court.
Usually, a Chapter 7 filing doesn’t have any exempt assets. If you have non-exempt assets and file a Chapter 7, any non-exempt property must be turned over to the trustee following the meeting. If you don’t turn over the property, you must turn over its fair market value in cash. The trustee will then sell the property and then send the proceeds received to your creditors. If the property is difficult to sell or if it isn’t worth a significant amount, the trustee might return it to you, which is considered abandoning it. There is a 60-day time period in which creditors and the trustee have the opportunity to challenge the debtor’s right to a discharge. If there are no challenges, you will get notice from the court that all your dischargeable debts have been discharged within three to six months. If you filed Chapter 13, you will be required to attend a hearing before a bankruptcy judge who will either confirm your repayment plan or deny it. If your plan gets confirmed and you make your payments on time, the balance remaining on any dischargeable debts will be eliminated at the bankruptcy plan’s end.
Often called liquidation bankruptcy, Chapter 7 bankruptcy doesn’t involve you paying anything to your creditors of unsecured debts unless a liquidation sale of any nonexempt assets is required by your bankruptcy petition. Under federal statutes, each individual can exempt as much as $21,625 for real estate used as a primary residence, up to $3,450 for a vehicle, plus the right to federal or state benefits and domestic support benefits. Any non-exempt assets might be sold with the proceeds being distributed to unsecured creditors to help satisfy your debts. Any remaining unpaid debt is usually discharged. You can only file for Chapter 7 if you pass an income eligibility test. If you want to prevent foreclosure on your home or any other real estate, you should file a Chapter 13. While Chapter 7 does postpone it, it doesn’t prevent it without it being sold to satisfy the debt.
Debt Consolidation and Credit Counseling
There are some alternatives to filing bankruptcy in South Carolina. Before deciding how to proceed with your credit problems, you should contact all your creditors and try to work out payment plans with them. Explain your situation and how you are facing financial difficulties. Try to set up a new arrangement, even if it is temporary. You might be surprised to learn that many creditors are willing to work with you.
You might want to look at a debt consolidation loan. You will get a single loan to pay off all your debts. You have one payment to make each month. A credit counseling plan might be another option. When you deal with a credit counselor and initiate a debt repayment plan, your creditors might lower your interest rates and accept lower payments. As part of this option you have to agree to not apply for additional credit or go further into debt until you have finished the program.
If you do file bankruptcy, you might be pleased to know that your credit score won’t be destroyed. There are myths that say you will have bad credit for at least 10 years, but actually, filing bankruptcy can improve your credit score. Within two years of your bankruptcy discharge, you could have a credit score of 700 or higher.
Without bankruptcy or credit counseling, you will continue to miss payments and damage your credit score even more. You have damaged your credit score by not being able to make your payments, so by doing something to take care of the problem and get rid of those debts will impact your score positively and help you get your credit back on track. Contact us today to learn how our Charleston bankruptcy lawyers can help you regain control of your finances.