What Happens to My Car in Bankruptcy in South Carolina?

When facing financial difficulties, many individuals in South Carolina consider bankruptcy as a viable option for relief. However, one of the most pressing concerns during this process is what will happen to their car. Understanding the implications of bankruptcy on vehicle ownership can help South Carolinians make informed decisions during this challenging time.

In South Carolina, the impact of bankruptcy on your car largely depends on the type of bankruptcy you file. The two most common forms are Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy: This is often referred to as “liquidation” bankruptcy. When filing for Chapter 7, the bankruptcy court may sell your non-exempt assets to repay creditors. However, South Carolina law provides certain exemptions that protect a portion of your vehicle’s value. As of 2023, the exemption for a car is up to $5,000 for individuals and $10,000 for married couples filing together. This means if your car is worth less than these amounts, you can keep it. If your vehicle's value exceeds these limits, the court may sell it, but you might still be able to work out a deal to retain it.

Chapter 13 Bankruptcy: In contrast, Chapter 13 bankruptcy is designed for individuals who wish to reorganize their finances and catch up on debts over a three to five-year repayment plan. In this scenario, you often have a greater chance of keeping your car, especially if you are behind on payments. Once you file for Chapter 13, an automatic stay is put in place, preventing creditors from repossessing your vehicle. During the repayment period, you can make arrangements to pay off any arrears while continuing to make regular monthly payments.

Reaffirmation Agreements: If you want to keep your car after filing for bankruptcy, you may need to sign a reaffirmation agreement. This legal document allows you to keep your car and maintain your loan, assuring the lender that you will continue making payments. However, it also means that you remain liable for the loan even after bankruptcy, so it’s important to evaluate whether this is a wise financial decision.

Ending Up with No Car: There are situations where you may end up losing your vehicle, particularly in Chapter 7 bankruptcy if it’s not protected by exemptions or if you are unable to keep up with financial obligations. In cases where a vehicle is repossessed before bankruptcy, you may not be able to reclaim it unless you can negotiate with the lender.

Conclusion: The fate of your car during bankruptcy in South Carolina is influenced by the type of bankruptcy you file and your specific financial situation. It is advisable to seek legal counsel to explore your options, understand your rights, and strategize how to keep your vehicle if that is your goal. Making an informed decision can pave the way for a brighter financial future.