Bankruptcy is filed when people ( the debtors ) can’t pay their debts, but one of the first things people want to know is what they can keep if they file for bankruptcy. The property you keep varies state to state, and depends on the exemptions that apply in that case. In many cases, the debtors keep everything they have, but what you get to keep depends on a lot of different factors.
The same day I read this article , on the difficulty of determining Connecticut exemptions through web research, a prospective client asked a question that made two things obvious:
1) She had been trying to research South Carolina’s homestead exemption online; and
2) she had gotten hold of some very misleading information.
So, I tried Googling “South Carolina homestead exemption.”
The first two items I saw on the day I looked dealt with property taxes, and the amount that can be assessed for school operations. Fascinating reading if you are trying to calculate property taxes by hand, but of limited value in determining whether you can lose your home to creditors if you file for bankruptcy.
The third link was to more, and different, information about real property taxes, applicable only if you are over age 65. (At that point, I had to go get a latte.)
The 4th link was to a firm that provides asset protection services, and cites the relevant statute, but is hopelessly out of date.
Same with the fifth link. And so on.
In fact, I gave up before I ever found correct information about the homestead exemption statute, which helps preserve your home from the claims of creditors. Clearly, this is another instance where most web sites get it wrong, at least in terms of the application to bankruptcy or debtor/creditor matters.
The South Carolina homestead exemption statute was amended in 2006, increasing the homestead exemption to $50,000 per property owner, with a cap of $100,000 per residence. South Carolina Code section 15-41-30 protects the first $50,000 of equity in a residence and contains a cost of living adjustment that will commence in July 2007, and will be updated annually thereafter. The statute became effective in May 2006. It was almost immediately challenged by a bankruptcy trustee, who argued that it should not be applied retroactively, i.e., that the $50,000 exemption would apply only to debts incurred after the effective date of the statute. The bankruptcy court that heard the objection decided that the statute was intended to apply retroactively, and ruled against the trustee. That decision was not appealed, so further appeal and/or a state court challenge could still be forthcoming, but as time passes, that becomes less likely.
Most of the remainder of the South Carolina exemption statute is also contained in section 15-41-30, but there are a few miscellaneous provisions scattered in other sections of the South Carolina Code. Even when you can find accurate information about the exemption scheme in your state, there are other complicating factors. For example, the exemptions that apply in your case may change if you’ve moved in the last two years, and it also depends on the laws of the state (or states) you have lived in before! Some states have adopted their own exemption laws while others use Federal bankruptcy exemptions.
Web research, however useful, simply cannot substitute for the advice of qualified bankruptcy counsel in order to determine exactly what you can claim as exempt.
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Last modified: May 23, 2013