Consumers overwhelmed by insurmountable debt often understand that bankruptcy is the most appropriate option for securing a better financial future, but many are hesitant to take the necessary steps for filing. People in South Carolina often worry that they will lose everything when seeking bankruptcy protections, and fear that they will be in an even worse position afterward. However, it is possible to keep certain exempt property during bankruptcy.
In both Chapter 7 and Chapter 13 bankruptcies, a person’s non-exempt property is usually collected and sold to pay off some of his or her debt. Non-exempt property usually includes assets that are not necessary for current modern standards of living. Collector’s items, family heirlooms and second or third vehicles are all non-exempt even if a person uses some of these items on a daily basis.
On the other hand, exempt property is anything considered necessary for modern life. Exempt property will vary from person to person. Someone who works as a professional contractor will usually keep his or her professional tools, whereas someone who engages in woodworking as a hobby may have those same tools labeled as non-exempt. This same distinction applies to musical instruments, which will usually be exempt for professional musicians, and non-exempt for hobbyists. Primary motor vehicles, reasonable household goods, clothing and pensions are also exempt.
Bankruptcy tends to be unfairly portrayed as failure, even though most people who seek bankruptcy protection tried their best to be financially responsible. This stigma combined with the fear of losing everything keeps some in South Carolina from filing for bankruptcy when it is actually their best option to achieve lasting debt relief. During bankruptcy, most people can retain a reasonable amount of property, making it possible for them to continue driving to work and, in some cases, to stay in their current home.
Source: FindLaw, “Exempt vs. Non-exempt Property Under Chapter 7”, Location, Accessed on Jan. 14, 2018