What are some of the best reasons to wait to file Chapter 7 bankruptcy in South Carolina? For many of my clients, time is of the essence and they are literally running to my office to save their home from a foreclosure sale. In their cases, it is easy to see that you cannot wait to file. However, for many of my clients, it is more advantageous to them that wait to file. In South Carolina, unlike most states, we do not have wage garnishment. Therefore, unless the debtor is experiencing foreclosure or a repossession, there usually isn’t an urgent need to file by a certain date. Here are a few reasons to wait to file.
1. IRS taxes. The general rule is that income taxes more than 3 years old can be dischargeable if they meet some additional factors. Assuming the client filed on time each year, it maybe worthwhile to wait to file after the April 15th deadline to discharge an additional year.
2. Debtor has received a one time windfall of money that wouldn’t be protected if he or she filed or bankruptcy. In this case it may be worthwhile for the debtor if possible to wait until the funds are spent on necessities such as the mortgage, utilities, attorney, fees and daily living expenses.
3. Transfers of property or assets to family members or insiders within 2-4 years prior to filing. Bankruptcy law allows a look back period of transfers or assets to family members 2-4 years prior to the filing of bankruptcy. The reason for the vagueness of the 2-4 year period is how different Courts interpret the “Statute of Elizabeth” look back period. An example of this might be where a Debtor transfers a house in his or her name to a family member 18 months prior to filing bankruptcy. In this example, the home has $50,000 in equity. In this scenario, filing for bankruptcy could be detrimental to both the Debtor and the transferee of the house. This reason for this is the Chapter 7 could undue the transfer or make the transferee give the Trustee the equity in the house. Waiting to file bankruptcy in this scenario might be the best option.
4. Generally, one of the few groups of clients that I see running into my office for an emergency Chapter 7 bankruptcy filing are clients with non-purchase money finance loans. Usually these are loans where the finance company has a secured loan on the Debtor’s furniture or other household items. Many times the Debtor has forgotten this until they receive a “Claim and Delivery” lawsuit in South Carolina giving them 5 days to respond. In this case, it is imperative that the Debtor call me immediately to discuss options.