Columbia SC Bankruptcy Law Blog

When South Carolina residents file for bankruptcy, their credit score is negatively affected. How much of a hit is taken depends upon certain factors.

A Chapter 7 bankruptcy can remain on someone's credit report for up to 10 years. Bankruptcy immediately lowers a credit score by possibly hundreds of points. How much damage is done to a credit score depends on how high it was before the bankruptcy. Generally, the higher a person's credit score is, the bigger the hit it will take when they file for bankruptcy. Therefore, even people with a high credit score can lose enough points to give them a below average score. Eventually, their credit can begin to rebound, but they will need to demonstrate an ability to pay on time by obtaining a loan or getting a credit card. When a low credit score makes that difficult or impossible, a secured credit card is often a viable solution.

South Carolina residents may recall that the prominent for-profit higher education company Corinthian Colleges filed for Chapter 11 bankruptcy in May 2015. In a March 25 speech, the U.S. Secretary of Education said that investigations had linked 91 of the troubled educator's campuses with fraud, which observers hope will make it easier for its former students to apply for debt relief.

A report from the Department of Education reveals that only 8,800 former students of the for-profit educator have seen their loans discharged. Corinthian Colleges had more than 70,000 students enrolled when it cancelled all classes in 2014 and as many as 350,000 in 2010. These numbers place a great burden on the DOE, and student advocates are calling for student debt relief rules to be relaxed. Students are currently required to apply for relief individually and complete copious amounts of paperwork.

Having health insurance can help defray the cost of care, but it is not a guarantee that a South Carolina resident won't experience financial hardship. One poll of residents of another southern state found that 76 percent of those who drew down their savings or racked up credit card debt in the prior two years had health insurance. According to a national poll, 26 percent of respondents said that a medical debt caused a serious financial problem.

In addition to running out of savings, those who are unable to pay the bills may be forced to declare bankruptcy. This could have a significant impact on their credit scores, which may make it hard to buy a home or get other types of financing. Those who have been hit by large medical debts have also had to significantly alter their lifestyle to cope.

The process of debt settlement entails a debtor asking a creditor or creditors to take less than what they owe. While this may be advantageous for some South Carolina consumers, there are several variables that come into play before such a request may be seriously considered. First, a debtor must have one or more late or missed payments or an account has just gone into collections.

Absent this, a creditor may believe that a debtor has the means to repay the debt and will ask for full payment of an outstanding balance. However, for those who think that a debt settlement is in their best interest, they have three options to go about getting one. Two common options include working with a debt settlement company or talking directly to creditors in an effort to work out alternate payment terms.