What Happens to Your Car Title in Bankruptcy in South Carolina?

Filing for bankruptcy can be a complex process, especially when it comes to handling assets like your car and its title. In South Carolina, understanding what happens to your car title during bankruptcy is essential for ensuring you navigate this important legal matter effectively.

When you file for bankruptcy, your assets, including your car, are assessed to determine how they will be handled in the bankruptcy proceedings. In South Carolina, most individuals file for Chapter 7 or Chapter 13 bankruptcy, and the treatment of your car title varies depending on the type of bankruptcy you choose.

Chapter 7 Bankruptcy and Your Car Title

In a Chapter 7 bankruptcy, a trustee is assigned to your case and will evaluate your assets to determine if any can be liquidated to pay off creditors. However, South Carolina allows for certain exemptions, including a vehicle exemption. As of 2023, you can exempt up to $5,000 of equity in your vehicle, plus an additional amount if you are a member of a family with dependents.

If your car’s equity is below this exempted amount, you typically get to retain your vehicle and its title. However, if your equity exceeds the exemption, the trustee may sell your car to pay creditors. In this case, you could lose ownership and the title of the vehicle.

Chapter 13 Bankruptcy and Car Title Retention

Chapter 13 bankruptcy, often called a wage earner's plan, allows you to retain your assets while developing a repayment plan to pay off your debts over three to five years. In this scenario, your car title remains with you as long as you maintain your loan payments and adhere to the bankruptcy repayment plan.

During Chapter 13 proceedings, you can also negotiate with your creditors. If you owe more on your car than it is worth, you may be able to “cram down” the loan, reducing your principal balance to the car’s current value while restructuring the payments.

Reaffirmation Agreement for Car Loans

In both Chapter 7 and Chapter 13, you may have the option to sign a reaffirmation agreement for your car loan. This agreement allows you to keep the car while continuing to make regular payments, effectively excluding the vehicle from bankruptcy proceedings. However, it is essential to ensure that you can afford the payments before opting for this route, as failing to uphold the agreement could lead to repossession.

Possible Consequences and Considerations

It’s important to remember that bankruptcy laws can be intricate. Additionally, failing to meet the requirements during bankruptcy can have serious repercussions, including the loss of your car. Always consult with a qualified bankruptcy attorney to understand your options and the implications for your car title.

In conclusion, what happens to your car title in bankruptcy in South Carolina primarily depends on the chapter you file and the exemptions available to you. Understanding these factors can help you make informed decisions and better prepare for the financial recovery process.