This article is an overview of the bankruptcy process in South Dakota.
The Decision to File Bankruptcy
First, a person needs to make the decision to file bankruptcy. This decision usually is made, or I advise my clients it is probably time to file when in spite of their best efforts and after doing a family budget and eliminating unnecessary or excessive expenses, they are simply at that point where they will never get the debts paid back on their incomes.
Helpful in making the first step is a consultation with an attorney. Many South Dakota bankruptcy attorneys offer free consultations, and most will at least speak with you on the phone and provide you with information.
Your Property in South Dakota Bankruptcies
In a Chapter 7 bankruptcy, the trustee may collect your property and sell it to pay out your creditors as much as possible. However, the trustee cannot take all of your property - some is protected by state law. As such, it is crucial to have a basic understanding of what types of property is protected by South Dakota's laws.
South Dakota has specific state laws that protect your personal property. Items that are protected by South Dakota law are the family bible, church pews, family photos, medical aids and... South Dakota law also provides for what some bankruptcy attorneys call a "wild card" exemption. This means that even if your property is not specifically listed as a category of protected property you may nevertheless keep it during bankruptcy. The wild card is a dollar amount that you can allocate to protect property. (This amount is adjusted from time to time, but is in the thousands of dollars. Ask a bankruptcy attorney for the specific amount). Here's how it works. If the wild card was $7,000 in your case, you would draw an imaginary circle and put select items in it (car, tools, television, jewelry, etc.) until the value of all those items was equal to $7,000. The wild card serves to allow the debtor in a bankruptcy case in South Dakota to choose among items she deems important enough to hold on to.
Real property is more complex. Generally, real property is protected in bankruptcy by federal law or state "homestead exemptions," and South Dakota has its own homestead law that trumps the federal law scheme. So, in South Dakota, a person can save her home if the equity in the house is less than $60,000. So if you have a mortgage that is currently at $20,000 and your house is worth $85,000, the equity in your home is $65,000 so the trustee can sell the home, give you $60,000, give the bank $20,000, and divide $5,000 among your creditors.