What Are the South Dakota Bankruptcy Exemptions?

What are the South Dakota bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

When you file for Chapter 7 bankruptcy, the bankruptcy court will assign a trustee to your case. This bankruptcy trustee is empowered to sell any of your personal property that isn’t considered “exempt” under South Dakota’s bankruptcy laws. They will then pass on the proceeds from this sale to benefit your creditors. Thankfully, you can apply South Dakota bankruptcy exemptions to your assets to protect them from the risk of being sold by your trustee. It’s important to claim every bankruptcy exemption available to you, as you don’t want to be saddled with the burden of repurchasing necessities you lost to your trustee because you didn’t double-check that they were listed with the rest of your South Dakota exemptions.

Does South Dakota allow the use of federal bankruptcy exemptions?

South Dakota is among the majority of states that doesn’t allow residents to claim federal bankruptcy exemptions. Sixteen states and the District of Columbia allow residents to choose from their state exemption structure or the federal exemption structure per the federal Bankruptcy Code. As South Dakota does not, this makes the process of claiming exempt property more straightforward because you won’t have to compare two schemes to see which is more advantageous. As long as you’ve lived in South Dakota for a minimum of two years, you’ll apply state bankruptcy law and federal nonbankruptcy exemptions only when claiming exemptions for your personal property.

South Dakota Bankruptcy Exemptions

When evaluating the figures listed below, please keep in mind that South Dakota allows married couples who are filing jointly to benefit from the “doubling rule.” Meaning, that with few exceptions, married spouses filing jointly (who co-own any particular asset they’re seeking to exempt) may claim double the exemption value offered to single filers. As a result, if you’re married and filing jointly with your spouse, unless you don’t co-own a particular asset, you can double all of the exemption values listed below, unless otherwise noted.

Real Property - the South Dakota Homestead Exemption

The notable exception to the doubling rule is the South Dakota homestead exemption. Married couples are not permitted to double this particular exemption. Filers benefit from unlimited value of equity in their primary residence, subject to the following conditions:

• Unlimited value of equity is protected, provided that the homestead property is less than 1 acre if located in a town or city and less than 160 acres if located in a rural area.

• A mobile home may be covered under this exemption if it is larger than 240 square feet and it was registered with the state at least 6 months before a bankruptcy petition was filed with the state.

• If a filer sells their home, up to $30,000 of the proceeds of that sale may be exempted for up to 1 year.

• If a filer sells their home, up to $170,000 of the proceeds of that sale may be exempted for up to 1 year if the filer is a widow, widower, or both single and older than 70 years.

• The spouse or child of a deceased homeowner is eligible to claim this exemption.

Personal Property Exemptions

It is impossible to benefit from the fresh start that bankruptcy provides if you don’t claim enough bankruptcy exemptions. If the bankruptcy court sells all your “stuff,” you’ll be forced to repurchase all essentials. Therefore, take care to claim every exemption available to you when filing bankruptcy. South Dakota law doesn’t provide many personal property exemptions, but you can use the wildcard exemption (explained in greater detail below) to exempt additional personal property, including equity in your motor vehicle and tools of the trade necessary for your profession. Unless otherwise noted, filers may exempt the full value of the following personal property:

• Bible, books, and schoolbooks (up to $200)

• Burial plot

• Cemetery association property

• Church pew

• Clothing

• Food and fuel (to last 1 year)

• Health aids (prescribed by a professional)

• Pictures

• Property of a business partnership

Money Benefits

Additionally, South Dakota law allows filers to protect certain monetary assets, including different kinds of life insurance proceeds, public benefits, earned wages, and retirement accounts. Unless otherwise noted, you may exempt the full value of the following monetary assets and benefits:

• Annuity contract proceeds (up to $250 per month)

• Crime victims’ compensation

• Domestic support award ordered by the court - alimony, spousal support, child support (up to $750/month)

• ERISA-qualified benefits (up to the currently-allowed amount under state and federal law)

• Fraternal benefit society benefits

• Health benefits (up to $20,000)

• Life insurance proceeds if the beneficiary is a surviving spouse or child (up to $10,000)

• Life insurance proceeds (if the policy specifically states that it cannot be used to pay creditors)

• Pensions of city employees and public employees

• Proceeds or cash value of an endowment or life insurance policy (up to $20,000)

• Public assistance

• Unemployment compensation

• Wages earned by inmates enrolled in work programs

• Wages earned within 60 days before filing for bankruptcy (if needed to support a family)

• Workers’ compensation

Other South Dakota Exemptions

Once you’ve claimed every exemption (applicable to your situation) listed above, make sure to ask yourself if any of your property remains nonexempt. Also ask yourself whether the partial value of a particular asset remains nonexempt. If either of these scenarios applies to you, you may be able to use the South Dakota wildcard exemption to exempt additional assets or asset values. All single filers are entitled to claim an additional $5,000 in personal property value through this wildcard provision, whereas married couples filing jointly can claim $10,000 in additional value. If you’re filing as a single individual but you are the head of your household, you can claim up to $7,000 in exemption value. Note that the wildcard exemption cannot be used to safeguard additional equity in real estate. The homestead exemption is your only option for protecting equity in real property.

Filing Chapter 7 Bankruptcy? 

If all of this information seems like a lot to process on your own, know that most bankruptcy attorneys offer free consultations. As a result, at any point in the bankruptcy filing process, you can speak with a lawyer in your area at no cost. During your consultation, you can ask any questions you have about filing for Chapter 7 or Chapter 13 bankruptcy, property exemptions, and any other aspect of your bankruptcy case you have concerns about. If, after your free consultation, you’re not in a financial position to continue receiving legal advice from an attorney, Upsolve may be able to help you file a Chapter 7 bankruptcy case for free. You don’t have to navigate the complexities of filing for bankruptcy on your own. In addition to these resources, you can access free informational guides about filing for bankruptcy on the Upsolve website at any time.