By Columbia – Lexington Bankruptcy Attorney Lex Rogerson
Automatic adjustments to South Carolina exemption limits mean better asset protection in bankruptcy court.
Columbia residents filing bankruptcy will find their homes, cars, and other assets a little safer on July 1. That’s when the bankruptcy exemptions go up under a state law that clicks in every two years.
Bankruptcy exemptions determine how much value in different kinds of propety a debtor can protect against creditors and bankruptcy trustees.
How we got here
For about 30 years, South Carolina exemptions remained the same: $5,000 for a home, $1,200 for a car, $500 worth of jewelry. With inflation, these figures became inadequate.
In 2006, the General Assembly recognized this and raised the homestead exemption to $50,000. Two years later, it increased the limits for other kinds of property. For example, the motor vehicle exemption went up to $5,000. And instead of setting numbers that stay the same over several years, the law built in a cost-of-living adjustment.
Every other year, state economists compare the Southeast Consumer Price Index with the index for 2006. Then they apply the percentage increase to the dollar limits set in May 2008. The resulting numbers become effective the following July. The current increases are the fourth adjustment since that law took effect.
The new bankruptcy exemptions
For most home owners, the home itself is the most important thing to protect. The bankruptcy exemption for a home will be $58,225, up from the current $56,150. For jointly owned homes, the maximum all owners may exempt increases to $116,450. The prior maximum was $112,275. Other increases include:
- household goods, up from $5,625 to $5,825
- jewelry, up from $1,125 to $1,175
- cash or liquid assets, up from $5,625 to $5,825
- tools of the trade, up from $1,675 to $1,750
- any property (“wild card”), up from $5,625 to $5,825
- cash value of life insurance, up from $4,500 to $4,625
Some exemptions are not available to all debtors. For example, a debtor cannot claim a cash exemption if he claims a homestead exemption. But the debtor may be able to use the wild card exemption to protect cash items.
Why it matters
Taken separately, each adjustment to the bankruptcy exemptions has been pretty small. One increase rarely makes the difference between a debtor keeping or losing his home.
But the cumulative increases can make a difference. Every home owner can now protect over $8,000 more of home equity than in May 2008, an increase of over 16%. And the difference can only become larger with time.
In the clash between creditors and the rest of us, inflation is no longer quite so strong an ally of the creditor.
To find out whether the new exemption figures will help you protect your property, contact us.