Debt Relief

South Carolina Debt Relief: Your Guide to State Laws and Managing Debt

south Carolina debt

When it comes to debt relief and debt collection protections in South Carolina, the state has several laws that go above and beyond federal protections, such as prohibiting the use of wage garnishment in connection to consumer debts and homestead laws that can protect vast portions of your property and estate from debt collectors.

However, it also has loose restrictions on payday loans. In South Carolina, you could be looking at rates as high as 400% or more, depending on the financing charges applied by your lender.

Because state laws fall on both sides of the spectrum, being either extremely protective of consumers or leaving them to essentially fend for themselves in predatory financial sectors, it’s important to familiarize yourself with these laws. In this post, we’ll do just that, taking a deep dive into debt relief options in the state of South Carolina, how to obtain legal representation and methods you can use to eliminate that debt on your own.

Debt in South Carolina: At a glance

South Carolina debt
Type Per capita balance, 2018 U.S. per capita balance Rank out of 50 states*
Credit card debt $2,830 $3,220 32
Student loan debt $5,870 $5,390 12
Auto debt $4,780 $4,700 21
Mortgage debt** $2,700 $33,680 29
*No. 1 is the highest
**First-lien debt only
Source: Federal Reserve Bank of New York, March 2019

Debt collection in South Carolina

While South Carolinians are far from holding the most debt in the country, the burden of owing thousands of dollars to creditors is not lessened. If you fall behind on your payments, the creditor will likely attempt to collect by contacting you via phone or postal mail. If they cannot, they will likely try to sell the debt to a third-party debt collector.

Under federal law, you have certain protections from aggressive debt collectors. The Fair Debt Collection Practices Act (FDCPA) restricts where and when third-party debt collectors can contact you.

Rules and regulations: Debt collectors are allowed to contact you at home, as well as at your place of employment. They can also contact your neighbors, friends and family members, but they are not allowed to tell them any information that would reveal that they are calling about a debt. If you request they stop contacting you and/or your employer about your debt, they must honor your request.

This law also says that they must contact you during “reasonable hours.” Those hours are considered to be 8 a.m. to 9 p.m. unless you specify otherwise. If you hire a lawyer, notify the debt collector in writing. All further communication must be with your attorney from that point forward.

How to stop debt collector calls: If you’ve asked your debt collector to stop contacting you, you may still legally hear from them in select few situations. Specifically, you may receive notification that you are being sued. If this happens, do not ignore the summons. If you play hooky, there’s a greater chance you will be found liable for the debt — even if it’s not one you legally owe.

Wage garnishment rules: If it is determined you owe the debt, there are several different things that may happen. The first is that your bank accounts could be garnished in order to pay down your debt. However, under South Carolina’s state laws there are certain sums which creditors and debt collectors cannot touch. As long as you’re not claiming the equity and interest in your home as exempt from debt collection and liens as covered below, the first $5,000 held in your bank accounts are safe from debt collectors under South Carolina law.

These state homestead laws are for more than just bank accounts, though. Other protected assets include:

  • Up to $50,000 in equity in a home in which you or your dependents live.
  • Up to $50,000 in equity in a cooperative which you or your dependents use as a home.
  • Up to $50,000 in equity in any burial plot you own for yourself and your dependents.
  • You can use the previous three exemptions up to $100,000.
  • If you co-own any of these properties, you must multiply $100,000 by your fraction of ownership in order to get your max exemption number.
  • Up to $5,000 in equity in your vehicle.
  • Up to $1,000 in personal or family jewelry.
  • Up to $4,000 in personal belongings, including livestock.
  • Up to $1,500 in professional items.
  • Up to an additional $5,000 in any excess equity or value for any of the exemptions listed above.
  • Value in any immature life insurance policies.
  • Up to $3,000 in firearms.
  • Any reparations or settlement payments.
  • Value in most tax-advantaged retirement plans.

In other states, your future wages could be garnished, which means they’d go straight to the debt collector from your employer without ever hitting your bank account. But in South Carolina, wage garnishment for consumer debt is illegal, taking one stressful concern off of your plate.

Responding to collection letters

When you receive a collection letter, be very careful how you respond. You may want to hire a lawyer right off the bat. But even and perhaps especially if you don’t, there are some basic steps you’re going to want to follow.

First, ask for a verification of the debt. You must do this in writing via postal mail within 30 days of receiving notification of the debt. The debt collector then has 30 days to mail you said verification, including the amount of the debt and the name and address of the original creditor. Once you have this  information, you should be able to figure out if this is a debt you actually owe or if it’s a debt that’s past its statute of limitations as covered in the section below.

If it’s not a valid debt, you can request the collector stop contacting you under the FDCPA. That does not mean they will stop trying to collect the debt or charging fees, but it does mean they won’t be allowed to contact you about it.

Be very careful to never assume any responsibility for the invalid debt in your communications with your debt collector — especially in writing. Do not make any payments, either, as both actions can restart the statute of limitations in South Carolina.

You will hear from them if they take legal action, though. If they take this step, do not ignore it. Show up on your court date, and get an attorney recommended by the state bar. Sometimes you can even find one for free or at a low cost, depending on your income.

If you feel you have been harassed, lied to, purposefully deceived or that the debt collector has violated any other terms of the FDCPA or state law, you can report them to the FTC and/or the South Carolina Department of Consumer Affairs.

Understanding South Carolina’s statute of limitations

The statute of limitations is the time period in which a creditor or debt collector must sue you. If they wait beyond this time period, the debt will be time-barred. When a debt is time-barred and past its statute of limitations, debt collectors can’t still call you and try to recoup the debt. Be careful about admitting in writing that you will make a payment toward the debt or actually making a payment, even if it’s a small amount. Doing so will reset that statute of limitations clock and give them the greenlight to go to court once again.

South Carolina Statute of Limitations on Debt
Mortgage debt 20 years
Medical debt 3 years
Credit card 3 years
Auto loan debt 6 years
State tax debt 10 years

In South Carolina, creditors and debt collectors can only come after you for medical and credit card debt for three years. They can pursue you for mortgage debt for twenty years and state tax debt for ten years.

Next to student loans, the biggest debt concern for South Carolinians compared to other U.S. consumers at large is auto debt. In the Palmetto State, creditors and debt collectors can sue you for a delinquent auto loan for up to six years.

South Carolina debt relief programs

If you’re struggling with debt, you’ll likely run across both debt settlement companies and credit counselors. Nonprofit credit counselors are typically more consumer-friendly and customer-oriented than debt settlement companies.

On the other hand, the for profit debt settlement industry has a history of some undesirable practices. The Consumer Financial Protection Bureau (CFPB) notes one common offense in big, bold print: charging upfront fees. This is against the rules, and a debt settlement company should never request it of you.

That’s not to say that all debt settlement companies will violate rules in pursuit of profit, but a nonprofit credit counselor endorsed by the National Foundation of Credit Counseling (NFCC) tends to be more consumer-friendly.

There are currently two NFCC members in South Carolina:

If your debt has you in crisis mode, those in the Greenville area can turn to United Ministries. In addition to providing food and medication for those in need, they also run a financial assistance program that can help you make up the difference as you try to meet your essential bills.

Payday lending laws in South Carolina

  • Maximum loan amount: $550
  • Maximum loan term: 31 days
  • Finance charges: Maximum of 15%

Payday loans are notorious for being relentlessly predatory. For this reason, states have laws regulating them. In South Carolina, you can only borrow up to $550, and the maximum loan term is 31 days.

Figuring out finance charges is tricky because we’re more accustomed to seeing annual percentage rates (APRs). For example, in South Carolina, your finance charges cannot exceed 15% of your base loan amount. Fifteen percent seems like a reasonable number, until you convert it to an APR. A $550 payday loan stretched out over a month carrying the max finance charge of 15% has an APR of 179.99%.

Believe it or not, that’s not even the highest your APR can climb. According to the CFPB, a loan with the same finance charge parameters but a term reduced to two weeks carries an APR of around 400%, according to the CFPB.

We do not recommend the use of payday loans. Instead, we recommend exploring the following alternative solutions.

Tips to tackle debt in South Carolina

Most are aware that payday loans should be a last resort, but sometimes consumers feel there is no where else to turn. We’re here to tell you that there are financially healthier alternatives.

If you’ve never heard of any of these methods before, don’t worry. We’re about to delve deeper into each one.

Consolidate your debt

If you are consolidating your debt, it is because you owe consumer debt to more than one creditor or debt collector and want to simplify your payments, you’re looking for a better deal on your APR, or you want to extend the term of your loans.

When you consolidate, you are borrowing a lump sum to pay off those debts immediately. Then, you will owe the lender who issued the consolidation loan one monthly installment payment, which should not vary much from month to month, barring late fees or penalties.

The biggest reason to consolidate is to bring your APR down. If your consolidation loan isn’t doing that for you, you’ll want to run the math using an online calculator to see if taking out the loan would actually save you money.

Refinance

Another way to get a handle on your debt is to refinance. For example, maybe your auto loan payments are just too much for you to manage on a monthly basis. You could refinance for a lower monthly payment, though there is a strong chance you’ll end up paying more over the life of your loan if your refinance spreads your repayment term over a longer time period.

Another example of using a refinance to better manage your debt is a mortgage refinance. Let’s say you bought a home in the early aughts, when the APR on mortgages was much higher than it is today. By refinancing at today’s rates, there’s a good chance you’ll be able to bring your APR down, especially if you do not extend the repayment terms with your refinance.

The last arena where you’ll typically find refinancing is with student loans. If your student loans are issued by the federal government, it is very rare that refinancing will be beneficial to you. This is because when you refinance on the privatized market, you’re forfeiting all advantaged repayment plans, forgiveness and cancellation opportunities and other perks that come along with federal student loans.

If your student loans are already issued by a private lender, you’re more likely to benefit from a refinance. Do run the numbers first to see how your new APR and term length will affect not only your monthly payments, but also the amount you’ll pay over the life of your loan.

Use a balance transfer card

If you have enough discipline to not abuse a new credit card, you may want to look into a balance transfer. Balance transfers are when you take the balance you owe on one card and transfer it to another, typically for fee that’s somewhere in the 3 to 5% range.

The key to successfully using a balance transfer is to find an offer for 0% introductory APR. That way you cut down on what you’re being charged every month in terms of interest. This introductory offer will only last for a set amount of time — usually somewhere between 12 and 21 months — so be sure you have a plan to pay off your debt completely before your balance starts incurring interest again.

This strategy is not going to work if your credit is shot, as you likely won’t qualify for the new card. It’s also not a good idea to implement if you have a history of bad credit card habits. If you’re just going to rack up more debt now that your balance has been transferred to a new card, using a balance transfer isn’t advantageous. It’s financially dangerous.

Apply for financial assistance through your hospital system

If you’re facing medical debt, one way to head off big problems before they start is to look into your hospital system’s financial assistance program. All nonprofit hospitals are obligated to run one by law. For example, you can view the Medical University of South Carolina’s financial assistance program overview here.

These programs could wipe out a portion of or your entire medical debt. But you have to apply for the program before the hospital system sells your debt to a third-party debt collector. Because once the debt collector has already purchased the debt, they’re not able or inclined to go back and put you through the hospital’s financial assistance program.

Filing for bankruptcy in South Carolina

If things have gotten too far out of control, you may be thinking about bankruptcy. Staring down this legal process can be intimidating. However, in the right situation it can provide some hope.

Filing for bankruptcy is extremely likely to have a large negative impact on your credit, but that impact doesn’t last. While a bankruptcy can take up to 10 years to fall off your credit report completely, the degree of its impact on your credit score lessens over that time period. In fact, a LendingTree study found that two years after filing, 65% of those who filed for bankruptcy had a credit score at or above 640.

There are two basic types of bankruptcy for consumers. The first is Chapter 7. When you file for Chapter 7 bankruptcy, you are agreeing to liquidate your assets in order to repay as much of the debt as possible.

The other type of bankruptcy — Chapter 13 — does not require you to liquidate all of your assets, but it does require you to pay off more of your debt within three to five years. Rather than making your debt disappear, a Chapter 13 bankruptcy restructures your debt so you’ll have an easier time paying it off.

The method that’s right for you will vary heavily depending on personal circumstances. You will likely want to hire a lawyer to help you through this process because of this fact. Even if you get legal representation, it’s still a good idea to familiarize yourself with the local bankruptcy process so you know what to expect.

The bottom line

No matter how you tackle your debt, you’re on the right path by recognizing it as a problem. Keep moving forward, educating yourself further about both protective laws and what is required of you as consumer, so you can reach debt-free status as quickly as possible.

The information in this article is accurate as of the date of publishing. 

 

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