Inflation and Tariffs May Drive More SC Bankruptcy Filings in 2026

As rising costs from inflation and tariffs squeeze household budgets across South Carolina, more Rock Hill families are exploring Chapter 7 bankruptcy, and asking one urgent question: what happens to my car? For many working people in the greater Rock Hill area, a reliable vehicle is not a luxury. It is the lifeline that connects them to employment, medical care, and everyday necessities. The good news is that South Carolina law includes specific protections designed to help filers keep a modest vehicle. But the rules are technical, the stakes are high, and the details matter. Understanding how the state’s motor vehicle exemption works, and what additional steps you may need to take, can mean the difference between driving away with a fresh start and watching your car disappear from the driveway.

How Chapter 7 Bankruptcy Works and Why Vehicle Exemptions Matter

Chapter 7 is the most common form of consumer bankruptcy, and it involves the potential liquidation of nonexempt assets to repay creditors, after which most remaining unsecured debts are discharged. When you file, a court-appointed trustee reviews everything you own to determine what can be sold for the benefit of creditors. However, you do not lose everything. Every state provides a set of bankruptcy exemptions, legal protections that allow filers to keep property deemed essential for maintaining a household and employment.

South Carolina is not among the 17 states that allow residents to choose between state and federal bankruptcy exemptions. Instead, South Carolina law provides state-specific exemptions and does not permit filers to claim federal exemptions.
This means the amount of vehicle equity you can protect depends entirely on what South Carolina’s code allows, not the federal motor vehicle exemption figure you may see quoted online.

South Carolina’s Motor Vehicle Exemption in 2026

The South Carolina motor vehicle exemption is the primary tool for protecting your car in a Chapter 7 filing.
South Carolina permits the exemption of a certain amount of equity in a single motor vehicle, and a single filer can claim a motor vehicle exemption under S.C. Code Ann. 15-41-30(A)(2), with the exact amount subject to biennial inflation adjustments. The motor vehicle exemption was most recently adjusted to $6,325 effective July 1, 2024; a new adjustment is due July 1, 2026, and at least one source suggests the 2026 figure may be approximately $7,600. Married couples filing jointly may each claim the exemption, effectively doubling the protected amount, but this applies per debtor rather than being specifically tied to a ‘shared primary vehicle.’ Pursuant to S.C. Code § 15-41-30(B), these property exemption amounts are adjusted for inflation in each even-numbered year, so filers should always verify the current figures before filing.

Equity, not the vehicle’s sticker price, is what matters. To calculate your vehicle equity, subtract the outstanding loan balance from the car’s current fair market value using resources such as Kelley Blue Book or NADA. If you own the car outright, the full market value equals your equity. If your equity falls within the exemption limit, the trustee generally cannot take your vehicle.

The Wildcard Exemption: Extra Protection for Your Vehicle

South Carolina also offers a wildcard exemption that may provide additional coverage when the motor vehicle exemption alone falls short.
The South Carolina Bankruptcy Code offers a wildcard exemption under S.C. Code Ann. 15-41-30(A)(7) that filers can use to exempt additional property of their choice. It is a standalone exemption and is not specifically drawn from unused portions of the homestead exemption, but it can be applied in addition to the motor vehicle exemption to shield additional equity in your car. This stacking strategy is especially valuable for filers who do not own real property and have unused exemption amounts available.

Can You Keep Your Car in Chapter 7 if You Still Have a Loan?

Protecting your equity is only half the equation when a car loan is involved.
You cannot file for bankruptcy on a car loan and keep the car without paying as agreed. If you do not pay the amount owed, the lender can use its lien rights to repossess your vehicle.
The lender’s security interest survives the bankruptcy, which means staying current on payments is essential.

If your equity is protected and you want to keep a financed vehicle, you generally have three options:

• Reaffirmation: You sign a new agreement with the lender to continue making payments under the original or renegotiated terms. The debt survives the bankruptcy discharge.
• Redemption: You pay the lender the car’s current fair market value in a single lump sum and own the vehicle outright afterward. This option can be advantageous when you owe significantly more than the car is worth, but it requires access to cash.
• Surrender: You return the vehicle to the lender and walk away from the remaining loan balance, which is then discharged along with your other qualifying debts.

You can keep a vehicle if your equity is within the exemption limit, but if it is financed, you must be and stay current on payments in Chapter 7.
Each option carries different long-term financial consequences, and the right choice depends on your specific circumstances.

A Rock Hill Family Facing a Difficult Decision

Consider a hypothetical Rock Hill resident, a single parent working as a medical office assistant, who has accumulated $22,000 in credit card and medical debt after an unexpected health crisis. Collection calls have become relentless. A creditor recently obtained a court judgment, and creditors may pursue collection methods, such as bank account garnishment, after winning a court case. Wages for consumer debts are generally protected in South Carolina, so wage garnishment is typically not available to private creditors. The bank account garnishment is now cutting into an already-thin paycheck.

This parent drives a 2019 sedan with a fair market value of roughly $9,500 and an outstanding loan balance of $5,200, leaving approximately $4,300 in equity. Under South Carolina’s motor vehicle exemption, that equity is fully protected, as it falls within the motor vehicle exemption (the exemption was most recently adjusted to $6,325 effective July 1, 2024; a new adjustment is due July 1, 2026 and may be higher). By continuing to make regular car payments and filing a reaffirmation agreement, this parent could keep the vehicle, discharge the overwhelming unsecured debt, and stop the bank account garnishment through the automatic stay that takes effect the moment a bankruptcy petition is filed.

This scenario is hypothetical, and individual results depend on the specific facts of each case. But it illustrates how the exemption framework is designed to function for people in exactly this kind of situation.

How Economic Pressures Affect Chapter 7 Eligibility

Rising consumer costs from inflation and tariffs are reducing disposable income for households across South Carolina, and that shift has a direct relationship to Chapter 7 eligibility. To qualify for Chapter 7, filers must pass the means test, which compares household income to the state median. Filers earning below the median generally qualify automatically. For those above the median, the test deducts allowable expenses, housing, food, transportation, medical costs, and more, to determine whether sufficient disposable income exists to repay debts through a Chapter 13 plan instead.

When everyday costs rise, the math shifts in favor of eligibility. Higher grocery bills, fuel prices, and insurance premiums all reduce the disposable income figure calculated under the means test. For Rock Hill families already stretched thin, this means that individuals who might not have qualified for Chapter 7 a year ago could potentially qualify now. Honest, complete financial disclosure remains a non-negotiable requirement of the filing process, and the court will scrutinize every figure.

How Does This Impact Me?

Can you keep your car in Chapter 7 if you have too much equity?

If your vehicle equity exceeds South Carolina’s motor vehicle exemption, you may still have options. You can potentially cover the gap using the state’s wildcard exemption.
If a sale would not bring much for creditors, the trustee may "abandon" the car, and you would get to keep it.
In some cases, you may also negotiate to pay the trustee the value of the nonexempt equity to retain the vehicle. However, no outcome is guaranteed, and each trustee exercises independent judgment.

What debts does Chapter 7 actually eliminate?

Chapter 7 discharges most unsecured debts, including credit card balances, medical bills, payday loans, and personal loans. It does not discharge student loans (except in limited circumstances), most tax debts, child support, or alimony. Secured debts like car loans and mortgages are treated differently, the debt may be discharged, but the lender retains its lien on the property.

Does South Carolina’s short statute of limitations on debt affect my decision to file?

South Carolina has a three-year statute of limitations on credit card and medical debt, which is shorter than many other states. This compressed timeline may push creditors to pursue collections, including lawsuits and bank account garnishment, more aggressively than in states with longer limitation periods. However, wage garnishment for consumer debts is prohibited in South Carolina under S.C. Code § 37-5-104, making it unavailable as a collection tool for private creditors. If you are already facing a judgment or bank account garnishment, the automatic stay triggered by a bankruptcy filing provides immediate but temporary relief while your case proceeds.

Do I have to pass the means test to file Chapter 7 in Rock Hill?

Yes. The means test is a mandatory eligibility requirement. If your household income falls below South Carolina’s median for your family size, you generally qualify. If your income exceeds the median, further calculations involving your actual expenses will determine whether you are eligible. An experienced Chapter 7 bankruptcy attorney in Rock Hill can help you evaluate your specific numbers before you file.

What should I do if I am behind on my car payments and considering bankruptcy?

Timing matters.
Because Chapter 7 does not offer a payment plan, you cannot catch up on late mortgage or car payments, and you could lose your financed vehicle if you are behind on the loans when you file.
If keeping your car is a priority and you are behind on payments, Chapter 13 may offer a better path. Consulting with an attorney before filing allows you to evaluate which chapter best protects your vehicle and your financial future.

Protecting Your Vehicle and Your Future in Rock Hill

For Rock Hill residents overwhelmed by unsecured debt, Chapter 7 bankruptcy may offer the fresh start the law was designed to provide, and in many cases, you can keep your car throughout the process. South Carolina’s motor vehicle exemption, combined with the wildcard exemption and proper planning around car loans, gives filers meaningful tools to protect essential transportation. But the process requires accurate financial disclosure, careful calculation of equity, compliance with the means test, and, when a car loan is involved, a clear strategy for addressing the lender’s secured interest. Every case is different, and the information in this article is educational, not legal advice tailored to your individual situation.

If you are facing collection calls, wage garnishment, or the threat of repossession and want to understand whether Chapter 7 bankruptcy may be right for you, The Howze Law Firm LLC can help you evaluate your options. Call 803-266-1812 to speak with a knowledgeable bankruptcy attorney, or contact us today to schedule a consultation. Understanding your rights is the first step toward regaining control of your financial future.