Written by South Carolina Bankruptcy Lawyer, Russell A. DeMott
What Are South Carolina Bankruptcy Laws?
From time to time clients ask me about filing bankruptcy under “South Carolina bankruptcy laws.” It’s logical for them to ask this question because they live in places like Mt. Pleasant, Goose Creek, Summerville, or Charleston, South Carolina. However, technically speaking, there really is no such thing as South Carolina bankruptcy law. But this doesn’t mean South Carolina law won’t affect your case.
Bankruptcy Law is Federal Law
In Article I, Section 8, the Constitution gives Congress power to enact “uniform” bankruptcy laws. Our bankruptcy law is found in Title 11 of the United States Code. Because of this any section of the Bankruptcy Code will begin with “11.” (We’ll call it “the Code” from here on out.) For example, the automatic stay is found in 11 U.S.C. section 362 of the U.S. Code. Bankruptcy law, therefore, is federal law, and there is no such thing as “South Carolina bankruptcy laws.”
South Carolina Law is Still Important
Even though bankruptcy law is federal law, the Code specifically allows state law to control certain aspects of a case.
Give Me Some Examples
The most important example I can think of relates to exemptions. Exemptions are amounts of various types of property debtors can keep. Those amounts are exempt from execution (seizure to satisfy debts) under the law of each state. The Code allows states to “opt out” of the exemptions provided in the Code and establish their own exemptions. Many states, including South Carolina, have done just that. This means if you file bankruptcy, South Carolina law, not federal law, controls how much property you may keep. For example, under South Carolina law, each debtor may exempt up to $51,450 in equity in their residence. (Equity is the value of the property less any mortgages or other liens on the property.) In contrast, the Code’s exemptions–called “federal exemptions”–only allow debtors to exempt $20,200 in equity in their residence. So for protecting home equity, South Carolina law is far more generous. However, in other respects–with personal property, for example–the federal exemptions are better for debtors.
Another example is property interests. Property interests (what you own, how you own it, what interest a creditor might have in it, and so on) are controlled solely by state law, not federal law. To determine your interest a particular piece of real estate, to use one example, we look to South Carolina law. Was the description correct in the deed according to South Carolina law? Was the deed properly executed under South Carolina law?
Local Practice and Procedure
Another important example is local practice and procedure. In a certain sense, our bankruptcy court (officially called the “Bankruptcy Court for the District of South Carolina“) establishes a South Carolina way of doing things. All bankruptcy courts do this. We have local rules which apply only to South Carolina and decisions interpreting the Code, which may be very different than the ways other courts do things.
The current Code is relatively new. Most provisions went into effect on October 17, 2005. The Code is ill-conceived and very poorly drafted. (In fact, if you don’t believe me, try to find anyone who’ll argue otherwise!) Because of this, the law is interpreted very differently from one bankruptcy district to the next. So in way, our court interprets federal law in a uniquely South Carolina way.
While there’s no such thing as “South Carolina bankruptcy law,” if you file here in South Carolina, its laws and the procedures of our court will have a significant impact on your case.