South Carolina Is A Great Place To Be A Debtor

Different states have different rules when it comes to debt collections. Some states allow creditors to garnish a debtor’s wages to recover on judgments for things like credit card debt. In South Carolina, your wages can only be garnished for taxes and child support.

Also in our state, if you own and occupy a home, at present the first $56,000 of equity (per owner!) Is exempt from judgment creditors. In other words, if you and your spouse own a home that is worth $400,000 and you owe $300,000 to the bank on your mortgage, your home is protected from your creditors, because you and your wife have another $112,000 in exemptions on top of the amount you owe to the bank.

Some states allow creditors to assert a lien against a debtor’s bank account by serving a levy on the bank, without having to give notice to the debtor. Whatever the debtor has in the bank would be frozen and the creditor would be able to have that money paid over to it to apply toward the debt. Such is not the case in South Carolina. Before a creditor can get access to a bank account, a hearing (with advance notice to the debtor) must be held and a court order obtained to have the money paid toward the debt. Obviously, most debtors, once they receive notice that a hearing is coming, will clean out their bank accounts prior to the date of the hearing, so there will be nothing there for the creditor to get.

A judgment in South Carolina is only good for 10 years – after that it goes away. Some states allow creditors to renew judgments.

A judgment is still a good thing to have, but it does not guarantee that the creditor will get paid.

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Who Is This LLC And Why Won’t He Pay My Bill? Or, Why You Should Try To Get A Personal Guarantee In Your Contracts.

Any business just starting out is wise to incorporate. There are many different forms of corporations, mostly distinguished by the particular tax advantages each form offers to the incorporators. One of the most common forms of incorporation for small businesses is the LLC or Limited Liability Company.

One advantage that all forms of incorporation share is that they normally shield the individuals who form the corporation from personal liability for the debts of the corporation. In other words, if Billy Joe and Bobbie Sue decide to go into business, they may form a small corporation, known as Take The Money And Run, LLC (hereafter, TTMR, LLC). If you are a vendor who sells goods or services to TTMR, (Let’s say your company’s name is Bobby Mac, Inc.), they will be more than happy to sign your credit application on behalf of the LLC. That way, if they should fail to pay you, your only recourse is against TTMR, LLC which, if Billy Joe and Bobbie Sue are smart, will have no assets. In other words, they (figuratively) run off to Mexico and you are stuck.

Understanding that we who are in business have the main goal of making sales of our services or products, we cannot always be sure that the new customers we are dealing with will be reliable in making payments. It is also impossible to be paid in advance in all circumstances. One way to try to protect yourself as a supplier is to require the owners of the corporation to personally guarantee the payment of the contract.

In our example above, it would be a matter of requiring Billy Joe and Bobbie Sue to personally guarantee (in writing) that you will be paid. That way, even if the LLC has no assets, you can pursue the owners to try to get paid – assuming of course that they have any assets from which you can recover. This is not always practical – no customer wants to sign a personal guarantee, and if you are in a competitive business and are desperate to make sales, you may have to accept some risk by accepting a signature on behalf of the LLC only.

The other key would be to observe your own credit limits – if your contract provides that TTMR has a $2000 credit limit, abide by it. Don’t let them get into you for $4000 or $5000 before you realize you aren’t getting paid.

 

 

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Confessions of Judgment: A Useful Creditor Remedy

Confessions of Judgment (COJs) are recordable instruments in which a debtor acknowledges owing a debt and agrees that a judgment may be entered for that amount. Sometimes, when a debtor has no funds, he will agree to a judgment being entered with no contingencies. The more useful situation, from a creditor’s standpoint, is when the debtor wishes to make payments toward retiring the debt and is willing to sign a COJ that the creditor can hold as security. In other words, as long as payments are being made, the COJ is held by the creditor; if the debtor defaults in payment, the COJ is filed as a judgment, giving the debtor credit for any payments made against the amount of the judgment. It then becomes a lien against any real estate the debtor owns in the county where the COJ is filed.

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