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Columbia Creditors Rights Law Blog

COVID-19 Impact on Creditors’ Rights

The COVID-19 pandemic marks an unprecedented crisis for the world’s economy. Because of the immense financial strain it has placed on individuals and companies alike, you will inevitably encounter defaults as a secured or unsecured creditor. You may also receive requests for extensions, payment deferrals, modifications, and accommodations. There are rules in place to protect both debtors and creditors in the face of the pandemic. Our Columbia, SC attorneys can explain these rules and how to implement them.

Background on the COVID-19 Crisis

The coronavirus pandemic has had a devastating effect on the world’s economy. Here at home, it has placed a significant financial strain on those who’ve seen their businesses impacted by the shutdowns and slow reopening in many states, as well as those who’ve been laid off or have had their hours reduced at work.

This naturally places both businesses and individuals in a precarious position when it comes to repaying debts, and thus creates challenges for you as a creditor when it comes to collecting on those debts. No one knows how long the pandemic will last, but it will end eventually. Debtors are still obligated to pay, and you are still entitled to request payment.

What Creditors Need to Know About the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was introduced on March 19, 2020, is the government’s most significant and far-reaching economic response to the pandemic. This $2 trillion act aims to ease some of the pressure under which people and companies are struggling by providing grace periods, recovery rebates, and more.

Creditors and Mortgage Loans

The CARES Act has greatly affected the rights of creditors holding mortgage loans throughout the country.  These affects include placing a moratorium on foreclosures of federally-backed mortgage loans. This applies to many residential mortgage loans in the country.  At the time of this article, the moratorium on foreclosures of federally-backed mortgage loans is set to expire on August 31, 2020.

Under Section 4022(b), (c)(1), homeowners affected by the virus can request forbearance from their monthly mortgage payments for up to 180 days and then have the option to request an additional 180 days of forbearance if needed. No interest or penalties will be applied to the loan amount during that time. Essentially, the account will be treated as if the debtor is still making all payments on time and in full.

A mortgage loan servicer cannot start any judicial or non-judicial foreclosure process on federally-backed mortgage loans until the moratorium has expired, with the exception of abandoned properties. Foreclosure-related sales or evictions relating to federally-backed mortgage loans are also prohibited. Also, courts across the U.S. have limited operations to slow the spread of COVID-19, and many have postponed foreclosure hearings for both federally-backed and non-federally backed mortgage loans. South Carolina Courts began to allow foreclosures and evictions to proceed on non-federally backed mortgage loans on May 15, 2020.

Accommodations for Debtors

Your borrower has to approach you and ask for an extension or forbearance or make a plan to modify their payment amounts or schedule. They should not just stop paying without coming to an agreement of some kind with you. The regulations passed for the duration of the pandemic do limit what a creditor can do when seeking to enforce payment on a defaulted loan. Some accommodations for your debtors are required by law (such as the CARES Act), and others are at the creditor’s discretion.

Your relationship with your borrower and how you wish to maintain that relationship beyond the pandemic will affect how you respond. Are you willing to grant an extension on payments? For how long?  These are just some of the questions a creditor must ask themselves when determining how to proceed with a debtor in default during the pandemic.

Four Strategies for Ensuring Your Payment

It is critical to your business that outstanding debts are paid, regardless of the pandemic. Below are a few ways you can ensure that you are able to collect, including:

  • Investigate whether non-payment or postponement of payment is due to the COVID-19 crisis. While some debtors may claim hardship due to the pandemic, it is important to verify that they truly no longer have the ability to fulfill the payment arrangement. It’s a good idea to ask for written evidence, including bank statements, requests for government support, and statements from accountants or other third-parties. It is crucial to note that this is not a requirement for forbearance requests for government-backed mortgage loans.
  • Have debtors submit a written payment proposal. Make sure they explicitly acknowledge their request and proposal in writing. Having this in writing will make it harder for them to dispute it later on if they are unable to meet the terms set forth in the proposal. This will save you the time and cost of an unjustified dispute.
  • Ask the debtor to provide securities. If your debtor is unable to meet their payment obligations, they can pledge additional securities in the form of a guarantee from a board of directors or a third-party pledge or some other form of additional collateral. Again, make sure to consult with a lawyer to make sure the security construction is recorded properly to avoid securities that are not legally valid.

Contact a South Carolina Creditors’ Rights Lawyer for Assistance

This is a complicated and potentially confusing time for everyone, especially when it comes to finances and debt. An experienced and dedicated legal team becomes a necessity. Our knowledgeable attorneys can review your existing loans and use their expertise to guide you safely through this uncertain period. Please contact Crawford & von Keller, LLC, to set up a confidential consultation.

Bankruptcy and Creditors’ Rights: Your Guide to Setoff and Recoupment

It is not uncommon for businesses to have mutual debts. As long as both firms are able to fulfill their financial obligations, there will not be much of a problem. However, if one of the companies hits a financial rough patch, things can quickly become complicated—even more so if that firm files for bankruptcy protection.

If your company has mutual debt with a financially distressed business, you should be aware of your rights as a creditor. Through two key remedies—setoff and recoupment—you may be entitled to offset mutual debts. Here, our Columbia, SC bankruptcy attorneys explain the most important things you need to know about setoff and recoupment as debt collection tools.

Bankruptcy Offsets: Understanding the Remedies of Setoff and Recoupment

As described by the United States Department of Justice (DOJ), setoff and recoupment are two distinct legal remedies that allow companies to collect when there is a mutual debt. The right to set off mutual debt arises out of Section 553(a) of the Bankruptcy Code. In contrast, the right of recoupment is an equitable remedy created by the courts. It arises out of the common law. While setoff and recoupment are similar, they are subject to different rules and different limitations.

What Creditors Need to Know About Setoffs

The right to ‘setoff’ debt is one of the most powerful and effective collection tools for creditors of debtors that are nearing bankruptcy. In the most simple terms, a company that has mutual debts may be able to cancel out certain financial obligations in the event that it is no longer expecting to be repaid. Notably, a setoff is subject to an automatic stay (11 U.S. Code § 362). As such, there are actually two different types of setoffs:

  • Pre-petition setoffs; and
  • Post-petition setoffs.

If debt is set off before a bankruptcy petition is filed—meaning before the automatic stay is put into place—the action typically falls outside of reach of the bankruptcy code. In other words, the setoff will be permitted. However, once a bankruptcy petition has been filed, a creditor can only take a setoff after getting approval from a bankruptcy court. The right to unilateral setoff of that mutual debt is, at least temporarily, put on hold. For obvious reasons, setting off debt becomes far more complicated after a bankruptcy petition has been filed.

The bottom line: If your company has mutual debts with a firm that you believe is financially unstable and that may be on the path to bankruptcy, it is imperative that review your remedies immediately. The best option may be to set off debt as soon as possible. An experienced South Carolina bankruptcy lawyer can help you document and structure a setoff so that it is valid under state law. If a pre petition setoff is not done properly, it risks being disqualified by a bankruptcy court. Get professional guidance.

What Creditors Need to Know About Recoupment

Although similar to a setoff, recoupment is a distinct legal remedy—and there are some very important differences. Specifically, recoupment is a far more narrow, but also potentially more powerful debt collection remedy.

Much like a setoff, recoupment centers around companies that have mutual financial obligations to one and other. Though, in most courts, recoupment is not subject to an automatic stay. As such, a creditor may be able to offset the amount owed to a bankruptcy petitioner on a dollar-for-dollar basis without receiving approval from a bankruptcy court.

While the ability to avoid the automatic stay makes recoupement a more powerful remedy for creditors in cases in which a bankruptcy petition has already been filed, recoupment is only available for mutual debts that arise out of the same transaction (First Nat’l Bank v. Master Auto Serv. Corp).

What constitutes the “same transaction” is not always obvious or clear. Although courts have consistently found that mutual debts occurring out of a single contract meet this requirement, there have also been cases in which courts have ruled that a series of closely related transactions also satisfied this legal standard.

Call Our South Carolina Bankruptcy Lawyers for Immediate Assistance

At Crawford & von Keller, LLC, our top-rated South Carolina bankruptcy attorneys are skilled, results-oriented advocates for creditors. If you have questions about mutual debts, setoffs, or recoupment, we are here to help. To set up a strictly confidential, no obligation initial consultation, please contact our law firm today by calling 803-592-3863. With an office location in Columbia, we represent national clients in courts throughout the state of South Carolina.

South Carolina Commercial Landlords Should Know These Three Things About Distress and Distraint

If you are a commercial landlord in South Carolina and have concerns about a tenant moving out of the property without providing you with any compensation for unpaid rent or for the remaining amount of rent due according to the terms of the lease, you are likely wondering what remedies may be available to you. In some situations, the commercial tenant may leave its property in the commercial space—such as equipment, tools, or even retail merchandise. At the same time, the commercial tenant may leave garbage and other unwanted property in the space. What is a landlord supposed to do in these circumstances, and does the landlord have any rights to the property that may have some market value?

In such scenarios, it is essential for South Carolina landlords to know about distress and distraint under South Carolina law. This is a potential remedy for commercial landlords under South Carolina law whether the tenant has been evicted under South Carolina law or has simply abandoned the property without regard for the lease terms. The following are three important things that all commercial landlords should know.

  1. Distress and Distraint Refers to the Lawful Seizure and Sale of a Tenant’s Property

Under South Carolina law, distress and distraint refers to the process of seizing a commercial tenant’s property and selling it in order to cure defaults such as unpaid rent. To be clear, if a tenant does not pay rent and owes back rent to the landlord, the landlord may be able to move forward with the distress and distraint process in order to receive the amount of money it is owed in unpaid rent.

To pay the landlord, the tenant’s property ultimately will be seized and later sold, and the landlord will be entitled to receive an amount of the proceeds from that sale equal to the amount owed in unpaid rent.

  1. Landlord Must Move Forward with Distress and Distraint By Filing with the Magistrate’s Court

In order to move forward with distress and distraint, the landlord must file with the Magistrate’s court. The Magistrate’s court has jurisdiction over certain landlord-tenant issues, including distress and distraint. The landlord will need to file an affidavit that outlines the amount of unpaid rent owed. If the tenant is no longer in the property, the landlord also must file an affidavit clarifying that the tenant has abandoned the space. The Magistrate’s court will schedule a hearing, which may result in a warrant for the amount of unpaid rent.

  1. If Tenant Does Not Stop the Sale By Posting a Bond, Property Will Be Sold and Landlord Can Receive Unpaid Rent from the Proceeds

Once a warrant has been issued, a tenant will still have an opportunity to prevent the sale of its property by posting a bond. If the tenant posts a bond, the case will move onto a trial. If the tenant does not post a bond, then its property can be seized and sold. The landlord will be eligible to receive the amount of unpaid rent from the proceeds of the sale. However, it is important to know that the landlord cannot seek future unpaid rent if the tenant has abandoned the property.

While distress and distraint originally arose as a remedy through South Carolina case law, it is now a remedy that is now included in South Carolina statutory law.

Contact a South Carolina Creditors Rights Attorney

If you need assistance seeking unpaid rent from a commercial tenant, a South Carolina creditors’ rights lawyer can assist you. Contact Crawford & von Keller, LLC for more information.

3 Things a Commercial Landlord Should Know When a Tenant Files for Chapter 11 Bankruptcy

When a commercial tenant files for Chapter 11 bankruptcy, the commercial landlord can find itself in a difficult position. The tenant may owe unpaid rent, and the landlord will likely be concerned about getting that unpaid rent and any future rent while the tenant remains in the space. It is important for a commercial landlord to work with a South Carolina creditors’ rights lawyer to understand their rights. In the meantime, we have a list of three things a commercial landlord should know when a tenant files for Chapter 11 bankruptcy.

1. Tenant Has Three Options With Regard to the Lease: Assume It, Assign It, or Reject It

When a commercial tenant files for Chapter 11 bankruptcy, that commercial tenant has three options with regard to the lease:

● Assume the lease, which involves performing all of the tenant’s obligations under that lease, including paying rent;
● Assign the lease to a third party, which would involve a third party taking over the obligations under the lease; or
● Reject the lease, which requires the tenant to leave the commercial space.

Under the U.S. Bankruptcy Code, a commercial tenant has 120 days after filing for bankruptcy to decide on one of the above options. In some cases, a tenant can get a 90-day extension on that 12-day limit.

2. Automatic Stay Applies in a Chapter 11 Bankruptcy Case Involving a Commercial Landlord and Tenant

When a commercial tenant files for bankruptcy, it is extremely important for the commercial landlord to know that the automatic stay applies to the case. As such, a commercial tenant cannot initiate any legal proceedings against the tenant in an attempt to collect unpaid rent.

3. Shopping Center Leases Have Special Rules for Chapter 11 Bankruptcy

Commercial landlords should know that the U.S. Bankruptcy Code has a special section concerning shopping center leases when a commercial tenant files for Chapter 11 bankruptcy. Under § 265(b)(3), “a lease of real property in a shopping center” has particular protections if the tenant plans to assume the lease or to assign it to a third party. What are those special rules or protections?

With other commercial property—that is not in a shopping center—a commercial landlord does not have much say over what type of business the tenant might assign the lease to. However, if the commercial landlord owns a shopping center and the tenant had been renting space in a shopping center, then the mix of tenants in the structure, and the balance of types of businesses in the shopping center, must be taken into account when assigning the lease to a third party.

Contact a Creditors’ Rights Attorney in South Carolina for Assistance

If you own commercial property and one of your commercial tenants recently filed for bankruptcy, it is important to seek advice from an experienced creditors’ rights lawyer in South Carolina. An advocate at our firm can speak with you today about the case and about your options. Contact Crawford & von Keller, LLC to learn more about how we assist creditors in South Carolina.

5 Things South Carolina Landlords Should Know About Evicting an Insolvent Tenant

When you own residential or commercial property in South Carolina, it can be extremely frustrating to realize that you have rented to a tenant who is not paying rent on time. Whether you own commercial property and have a commercial tenant or residential property with a residential tenant, you most likely rely on those rent payments as a source of your own income. Accordingly, when a tenant does not pay, you may begin looking for options to evict the tenant from the property. The following are five things that South Carolina landlords should know about evicting an insolvent tenant.

To Evict a Tenant, You Must Terminate the Tenancy with Legal Cause

To lawfully evict a tenant in South Carolina, you must terminate the tenancy, and you must have legal cause to do so. If a tenant has not paid rent, the matter of unpaid rent is one reason to terminate the tenancy.

Landlords Must Give Tenants Notice Even When the Tenant Has Not Paid Rent

Even if the tenant has not paid rent, landlords are still required to give notice to the tenant in most situations. If the tenant does not pay rent on time and unpaid rent is the reason for terminating the tenancy and moving to evict the tenant, then the landlord typically must give a five-day notice to the tenant under South Carolina law. In general, the notice must inform the tenant that, unless rent is paid within five days, the landlord can terminate the lease and begin eviction proceedings. The notice must be in writing.

However, if the tenant’s lease already makes clear that the landlord will not give a written notice for past-due rent, then that lease clause already serves as the notice and the landlord does not have to give a separate, written five-day notice, according to the South Carolina bar.

If the Tenant Pays the Rent Within Five Days, the Landlord Cannot Terminate the Lease

The point of the five-day notice is that the tenant actually has five days to pay the rent. Accordingly, if the tenant pays rent within five days, then the landlord cannot terminate the lease and bring eviction proceedings.

To Evict a Tenant for Nonpayment of Rent, a Landlord Must File an Eviction Lawsuit

The ejectment of a tenant under South Carolina law, or eviction of a tenant, can only happen if a landlord files a lawsuit to evict the tenant. Once the tenant has not paid rent according to the terms of the lease of after the five-day notice, then the landlord can start this process.

Landlord Must Win an Eviction Lawsuit to Remove a Tenant from the Property

A landlord cannot simply remove a tenant from the property because of nonpayment of rent. Instead, the landlord must file an eviction lawsuit and must win that lawsuit before removing the tenant from the property. Then, the landlord is not permitted to physically remove the tenant himself or herself. Instead, a law enforcement official must be the one to handle the actual removal.

Contact a South Carolina Creditors’ Rights Lawyer

If you have questions about evicting a tenant for nonpayment of rent, a South Carolina creditors’ rights attorney can help. Contact Crawford & von Keller, LLC to learn more.

5 Things a Creditor Should Consider When a Customer Files for Bankruptcy

When a customer or client owes you money, it can be frustrating and even distressing to learn that the customer has filed for bankruptcy. It is important to remember that, just because a person or entity files for bankruptcy, creditors still may be able to collect some or all of the money owed to them. However, it is important to know what creditors can do, as well as what they cannot do, when a customer or client files for bankruptcy. The following is a list of tips from an article for creditors.

  1. You Must Immediately Stop Trying to Collect on the Debt

When a person or party files for bankruptcy, all creditors and debt collectors must immediately stop trying to collect on the debt because of the automatic stay under the U.S. Bankruptcy Code. The automatic stay is a powerful tool for debtors who file for bankruptcy because it requires creditors and debt collectors to immediately cease collection activities. If a creditor attempts to continue collection actions of any type, the creditor can face a violation and substantial fees.

  1. Understand How the Type of Bankruptcy is Likely to Affect You

There are substantial differences between Chapter 7 bankruptcy filings (a liquidation bankruptcy) and reorganization bankruptcies under Chapter 11 or Chapter 13. When a debtor files for Chapter 7 bankruptcy, all non-exempt assets belonging to the debtor will be liquidation, and creditors will be paid from the amount of money obtained through the liquidation. However, there is an order of paying creditors, and priority debt gets handled first. Differently, in a reorganization bankruptcy, an individual or a business filing under Chapter 13 or Chapter 11 respectively will develop a repayment plan to get back on track financially. While a creditor ultimately may not see all of the money it is owed under a reorganization bankruptcy, the repayment plan will involve steps for repaying creditors a particular amount over a period of time.

  1. You Will Need to File a Proof of Claim

As a creditor you will have received notice of the bankruptcy filing, and that notice will provide you with information about the date by which you must file a proof of claim. A proof of claim is simply a document that a creditor files with the bankruptcy court to say that she or he has a claim against the bankruptcy estate. The proof of claim details the amount of money the debtor owes along with other information about the debt, and it clarifies whether the debt is a priority debt.

  1. You Can Ask the Debtor Questions at the Meeting of Creditors 

The meeting of creditors, which is also known as a “341 hearing” since its requirement arises under Section 341 of the U.S. Bankruptcy Code, is a time that creditors can meet with the bankruptcy trustee and ask questions of the debtor.

  1. Creditors Have the Right to Review a Repayment Plan in a Reorganization Bankruptcy

If the debtor has filed for Chapter 11 bankruptcy or Chapter 13 bankruptcy, the creditor has a right to review the repayment plan. More than half of the creditors must approve the repayment plan in order for the court to approve it.

Contact a Columbia Creditors’ Rights Attorney 

Do you have questions about your rights as a creditor when a debtor files for bankruptcy? An experienced Columbia creditors’ rights attorney can help. Contact Crawford & von Keller, LLC today.


Understanding Garnishment in South Carolina

When a debtor owes money to a creditor, there are a number of different methods that a creditor can use to collect debt that is owed. One of the remedies that is commonly available to creditors to whom debt is owed is garnishment. However, it is important for creditors in South Carolina to know that wage garnishment is extremely limited when it comes to collecting debts that were incurred in South Carolina. While there are some circumstances in which wage garnishment may be available, it is typically not an available remedy for debt incurred in the state. However, there are other types of garnishment that may be available to creditors in South Carolina.

What is Garnishment?

According to the Cornell Legal Information Institute (LII), a garnishment is an order issued by a court after a plaintiff has successfully won a civil claim against a defendant for monetary damages. The garnishment order “instructs a third-party who owes money to the defendant to pay some or all of that money to the plaintiff instead of the defendant.”

Wage garnishment is the most common form of garnishment. In a wage garnishment situation, the garnishment order instructs the employer (the third party here, also known as the “garnishee”) to withhold wages that it would pay to the employee (the defendant or debtor in the case), and to give those wages or a percentage of them to the plaintiff (or the creditor).

Creditors Can Only Get Wage Garnishments in Certain Situations in South Carolina

Under South Carolina law, wage garnishment generally is prohibited as a way for creditors to collect on consumer debts. South Carolina is one of only a small handful of states that prohibits wage garnishment for consumer debts. In other words, a creditor cannot recoup money that a debtor owes by obtaining a wage garnishment order for debts incurred in South Carolina. There are only a few exceptions:

  • Consumer owes money to the federal government (such as unpaid taxes or federal student loans);
  • Consumer owes child support or alimony; or
  • Consumer incurred the debt in another state that widely permits wage garnishment for consumer debt and the consumer now lives in South Carolina.

If you are a private creditor, it is unlikely that you will be able to garnish wages in order to obtain payment for debts that you are owed. For example, wage garnishment is not possible in South Carolina for credit card debt, medical debt, and other related types of consumer debt. Federal government creditors that are allowed to garnish wages must obtain a court judgment in order to do so.

Options Beyond Wage Garnishment for Seeking Payment of Debt

Even if you are a creditor that cannot garnish wages under South Carolina law, there are other options available for seeking repayment of debt. South Carolina, for instance, has several grounds for attachment. While a creditor cannot garnish or attach wages, it may be able to attach—or freeze—bank accounts and other assets in order to recover money owed.

However, attachment is only possible once the creditor seeks and obtains a judgment against the debtor.

Contact a Creditors’ Rights Lawyer in Columbia, SC

If you have questions about collecting debt through attachment, a creditors’ rights attorney in Columbia can help. Contact Crawford & von Keller, LLC for more information about the services we provide to creditors in South Carolina.


What Is the Difference Between Consumer and Commercial Collections?

When a creditor takes steps to collect on a debt, it is extremely important to recognize that there are distinctions between collection on consumer debt and collecting on commercial debt. Different laws govern consumer and commercial collections, and creditors need to be aware of the distinctions when moving forward to collect on a debt. The following is key information about the ways in which consumer and commercial collections often differ from one another.

The Fair Debt Collection Practices Act (FDCPA) Governs Consumer Debt Collections 

Consumer debts can be both small and large, and specific consumer protection laws regulate debt collection practices concerning individual debtors. When a consumer owes a debt, any collection actions are governed by the Fair Debt Collection Practices Act (FDCPA). According to the Consumer Financial Protection Bureau (CFPB), the FDCPA prohibits debt collectors engaging consumer collections from doing any of the following:

  • Contacting debtors before 8 a.m. and after 9 p.m.;
  • Contacting debtors at work after the debtor asks to stop communication at work;
  • Harassing debtors or anyone connected to the debtor; and
  • Contacting a debtor directing despite knowing that the debtor is represented by an attorney.

Creditors attempting to collect money owed from debtors are not governed by the FDCPA, however. As the CFPB explains, the definition of a debt collector under the FDCPA includes “collection agencies, debt buyers, and lawyers who regularly collect debts as part of their business.” If you are a creditor and collecting debts is not a regular business practice, the FDCPA is not applicable.

It is important to note that the FDCPA does not govern business debts when an individual owes business debts as a sole proprietor, for example. Creditors who are seeking to hire a debt collection agency should know that any business debts typically are handled by collection companies that specialize in commercial debt.

Commercial Debt Collections and the Commercial Collection Agency Association (CCAA)

Most creditors that are seeking to collect commercial debts will turn to a collection agency that is certified by the Commercial Collection Agency Association (CCAA). The CCAA has a declaration of fair practices that is designed to regulate commercial debt collection practices.

While creditors sometimes will attempt to collect on individual consumer debt before hiring a debt collection company, most creditors do use a debt collection company to collect on commercial, or business, debt. This debt most frequently is known as “business to business,” or “B2B” debt. Since commercial collections often involve larger amounts of money and more entities than consumer debt, a majority of creditors assume that it is worth the cost—and the amount of time saved—to work with a debt collection company that specializes in commercial collections. 

Contact a Columbia Creditors’ Rights Attorney 

Do you need assistance determining how to move forward on collection actions? Do you need help considering the best methods for consumer or commercial collections? An aggressive Columbia creditors’ rights lawyer can begin working with you today. The advocates at our firm have years of experience serving creditors in South Carolina, and we can get started on your case immediately. Contact Crawford & von Keller, LLC for more information.


When Can Creditors Object to a Bankruptcy Discharge?

In many cases, when a debtor owes money to a creditor in Columbia, South Carolina, the debtor ultimately will file for personal bankruptcy or business bankruptcy in order to seek a discharge. Some creditors will be repaid a relatively large portion of the debt owed if the debtor files for a reorganization bankruptcy under Chapter 13 (for personal bankruptcy) or Chapter 11 (typically for business bankruptcy). With a reorganization bankruptcy, the creditor receives a portion of the debt over a repayment period. With a Chapter 7 liquidation bankruptcy, however, the creditor is only eligible to receive payment from the amount of the debtor’s assets that are liquidated and make up the bankruptcy estate. Then, the creditor needs to be aware that priority debt is repaid first, and some creditors may not be eligible for much—if any—recompense.

Given that a debtor’s decision to file for bankruptcy often leaves the creditor with less than the total debt owed, many creditors want to know if they have any options to object to a bankruptcy discharge. Under the U.S. Bankruptcy Code, there are certain situations in which a creditor may be able to object to a discharge, and ultimately may be able to prevent the debtor from receiving a discharge of debts. The following are situations in which a creditor may be able to successfully object to a bankruptcy discharge.

Debts Are Non-Dischargeable

There are certain types of debts that are non-dischargeable in many or most circumstances under the U.S. Bankruptcy Code, such as alimony or child support debts, unpaid income tax debt, and other types of debts owed to a federal agency. If particular debts are non-dischargeable, the creditor can object to a discharge.

Debts Involve Fraud

Many situations in which creditors object to a discharge involve fraud or misrepresentation. Fraud can take many different forms. For example, a debtor might lie about assets or the value of assets on the bankruptcy petition or on bankruptcy schedules. Or, for instance, the debtor might unlawfully transfer property to another party to avoid liquidation immediately prior to filing for bankruptcy protection.

Fraud can also refer to situations in which a debtor provides false information at a bankruptcy hearing or commits perjury, or scenarios in which a debtor destroys property or documentation concerning the value of certain property. There are also other types of fraud that may not be as obvious. For example, if a debtor took cash advances on a credit card in the three months leading up to his or her decision to file for bankruptcy, that debt may not be dischargeable.

Debtor Engages in Intentionally Wrongful Acts

Certain actions concerning debt can also lead to a successful objection to discharge by a creditor. For instance, if a debtor intentionally caused damage to another party’s property with the aim of having the debts resulting from that damage discharged in a bankruptcy proceeding, the creditor may be able to object.

Contact a Columbia, SC Creditors’ Rights Attorney

To object to a discharge, the creditor needs to file a motion or a lawsuit (or adversary case) based on the type of debt to which it is objecting. An experienced creditors’ rights lawyer in South Carolina can discuss the details of the case with you to help you move forward. Contact Crawford & von Keller, LLC to learn more about how we assist creditors in South Carolina.


What is a Fraudulent Conveyance?

As explained by the Cornell Legal Information Institute, a fraudulent conveyance is a transfer of real property — money or assets — for the primary purpose of putting it outside of the reach of creditors. If a transaction is deemed to be a ‘fraudulent conveyance’ a creditor may have the right to void it. In this article, our Columbia, SC debt collection attorneys highlight the most important things creditors should know regarding South Carolina’s laws on fraudulent conveyances.

South Carolina Law: Fraudulent Conveyances

South Carolina is one of many states that has signed onto the Uniform Fraudulent Transfer Act (UFTA). The UFTA makes it a civil violation for debtors to transfer assets to a third party simply to avoid paying back creditors. A fraudulent conveyance is generally not a criminal issue. When such a transfer occurs, the UFTA provides a remedy to creditors, allowing them to get access to fraudulently transferred property that would have otherwise not been available to satisfy a debt. To prove a fraudulent conveyance occurred, South Carolina creditors are generally required to meet the following three elements:

  1. The debtor in question actually transferred assets;
  2. The debtor received less than fair market value in the transaction; and
  3. The debtor is insolvent or was made insolvent as a result of the transfer.

If a debtor receives fair market value for the transfer of property, then, by definition, a fraudulent conveyance has not occurred. The debtor’s ability to satisfy their obligations to creditors would remain unchanged. In addition, a debtor that is fully solvent cannot make a fraudulent conveyance, as all creditors would still be able to hold them responsible irrespective of the transaction.

When Does Intent Matter? Voluntary Conveyance vs. Valuable Consideration

In South Carolina, fraudulent conveyance claims come in two different forms: those involving a ‘voluntary conveyance’ and those involving ‘valuable consideration’. With a voluntary conveyance — meaning a transfer in which no compensation was offered or grossly inadequate compensation was offered — creditors do not need to prove that the debtor had an actual intent to defraud. The intent is deemed irrelevant if the debtor received nothing, or very little in the return for transferring property (Royal Z Lanes, Inc. v. Collins Holding Corp). In contrast, when ‘valuable consideration’ was offered to the debtor — even though that consideration may have been below the true market value of the property — the burden of proof flips. In this circumstance, a creditor must be able to prove that the debtor actually made the transfer with the intent of avoiding satisfying their debts to the creditor.

Get Help From a Columbia, SC Creditors’ Rights Lawyer Today

At Crawford & von Keller, LLC, our South Carolina collection attorneys have the skills and experience needed to handle the full range of fraudulent conveyance claims. To set up a fully confidential, no obligation consultation, please do not hesitate to contact our legal team today. From our office in Columbia, we represent clients throughout South Carolina, including in Richland County and Lexington County.