NOTE: All the names in this article have been changed to protect their identity.
Veronica Blake thought she needed to file bankruptcy when she was sued by Sunshine Finance. South Carolina Legal Services (SCLS) clients are often fearful that bankruptcy is the only answer, because debt buyers and finance companies often tell them that. However, when you are on a fixed income and have no assets to protect (such as a house or a car), the creditor has no remedy against you other than to get a judgment that they cannot collect. We call this the bankruptcy bypass or being judgment proof, because South Carolina law prohibits garnishment of wages for consumer debt. Additionally, if a consumer has a house or a car to protect, the property exemptions found in S.C. Code 15-41-30 usually protect them without the necessity of filing bankruptcy. You can find our brochure about being judgment proof here.
As for Ms. Blake, SCLS accepted her case and filed an Answer denying the alleged debt. That kind of Answer is called a general denial. In response to the general denial, Sunshine Finance voluntarily dismissed its case against Ms. Blake. It turns out that there was no need for the client to file for bankruptcy. SCLS often has clients who are sued for collection by a debt buyer like Sunshine Finance. A debt buyer is an entity that is in the business of buying a debt for “pennies on the dollar” and then trying to collect the entire amount from the consumer. They most often have no way of proving the underlying debt, so, if they sue a consumer, they rely on the consumer not responding. In that case, the debt buyer gets a default judgment and the requirement of proof is very limited or, in some cases, nonexistent.
When SCLS represents the consumer, the debt buyer or other creditor is forced to present evidence with a live witness. This usually results in a dismissal, as in the case of this client, or in a settlement. As of the date of this article, SCLS had over 100 pending cases to defend consumers from debt collection and unconscionable collection practices. The S.C. Consumer Protection Code and the federal Fair Debt Collection Practices Act are 2 of the tools we use most often to protect clients from these practices.