South Carolina Bankruptcy Law: How to Manage Secured Loans

Bankruptcy can be a daunting process, especially when dealing with secured loans in South Carolina. A secured loan is a debt backed by collateral, such as a car or a house. Understanding how South Carolina bankruptcy law treats these loans is crucial for anyone considering filing for bankruptcy. Here's a guide to managing secured loans during bankruptcy in South Carolina.

In South Carolina, individuals can file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7, also known as liquidation bankruptcy, involves selling non-exempt assets to pay creditors, while Chapter 13 allows for a repayment plan to pay off debts over a set period. The type of bankruptcy you choose affects how you can manage secured loans.

Chapter 7 Bankruptcy and Secured Loans
When filing for Chapter 7 bankruptcy, secured loans are treated differently than unsecured debts. If you want to keep the collateral associated with the secured loan, like your house or car, you generally need to continue making payments on the loan. If you cannot maintain these payments, the lender has the right to repossess the collateral.

However, South Carolina law provides certain protections known as exemptions. Homeowners might be able to exempt a portion of their home’s equity from being used to pay off debts. In South Carolina, the homestead exemption allows individuals to protect up to $68,000 of equity in their home ($136,000 for married couples), providing vital security during bankruptcy.

Chapter 13 Bankruptcy and Secured Loans
For those who opt for Chapter 13 bankruptcy, the situation is a bit different. This type of bankruptcy involves restructuring debts so that you can keep your assets while catching up on missed payments. You will propose a repayment plan based on your income, allowing you to manage your secured loans effectively while retaining your property.

In Chapter 13, you can also “cram down” certain secured loans, adjusting the loan balance to the current market value of the collateral. This means if you owe more than your car is worth, you can reduce the loan amount to its current value, making payments more manageable.

Reaffirmation Agreements
Another option for managing secured loans during bankruptcy is the reaffirmation agreement. This legal document allows you to keep the secured asset and agree to continue making payments on the debt. It essentially reaffirms your obligation to the lender even after the bankruptcy discharge, ensuring you maintain ownership of the collateral. However, it’s essential to fully understand the implications of this agreement, as you are committing to repay the debt regardless of your bankruptcy status.

Counseling and Professional Guidance
It's highly advisable to seek professional guidance when dealing with secured loans during bankruptcy. A bankruptcy attorney familiar with South Carolina law can provide the necessary advice tailored to your financial situation. They can help you decide whether Chapter 7 or Chapter 13 is more beneficial for you, and assist in navigating the complexities of secured loans.

Conclusion
Managing secured loans during bankruptcy in South Carolina requires understanding your rights and options under state and federal law. Whether opting for Chapter 7 or Chapter 13, knowing how to navigate secured loans can save you from losing essential assets. Seek professional advice to ensure that you make informed decisions that align with your financial future.