Bankruptcy laws are the laws that govern the legal process in which an individual or an entity can seek relief from, restructure, or reduce certain debts. The federal law, the U.S. Bankruptcy Code, provides several chapters of bankruptcy for which individuals or entities may file. These include:
A lawyer can help an individual determine which chapter of bankruptcy best suits their needs. Additionally, a lawyer can assist an individual or entity with preparing the necessary documents and filing in bankruptcy court. The attorney can also represent them in court.
After a bankruptcy is filed, the court enters an automatic stay. This means creditors, collection agencies, or government agencies cannot make attempts to collect on the debts owed by the individual filing for bankruptcy.
How Do I File Bankruptcy in South Dakota?
All bankruptcy petitions in any state, including South Dakota, must be filed in a local federal bankruptcy court. The location will vary based on jurisdiction and local regulations. In general, the individual or entity is required to file their bankruptcy petition in a court in a jurisdiction where they have resided or operated a business within the last 180 days, or 6 months.
If an individual is seeking relief from their personal debts, they will file in a court that is close to their primary residence. If the individual is filing bankruptcy to obtain relief from business debts, they will file in a jurisdiction where their business is located. If the individual does not meet the 180 day requirement, they should file in the jurisdiction where they spend the majority of the last 180 days.
It is important to consult with an attorney prior to filing for bankruptcy in South Dakota. An attorney will explain the types of bankruptcy and their consequences, help an individual determine if bankruptcy is the solution that is needed, and help them file in the appropriate court.
What is Business Bankruptcy?
A business bankruptcy is a legal process that is designed to allow an individual or a business to obtain relief from their debt and have a financial fresh start while being fair to creditors. A business can file for bankruptcy under one of two chapters, Chapter 7 and Chapter 11.
Once bankruptcy proceedings begin, creditors cannot attempt to collect on debts from the business until the bankruptcy process is complete. If a small business owner struggles with a large amount of debt, a Chapter 7 bankruptcy may help.
A Chapter 7 bankruptcy can eliminate most debts for which the business is liable. If an individual is a sole proprietor or an individual’s business is considered a general partnership, they are personally liable for their business’ debts, they may file a Chapter 7 bankruptcy to eliminate debt.
On the other hand, if the business is a separate legal entity, such as a corporation or an LLC, bankruptcy must be filed on behalf of the business. A Chapter 11 bankruptcy will allow the business to restructure and become profitable again. The business will be required to provide a plan for paying back its debts.
Will I Have to Go Through the South Dakota Courts to File Bankruptcy?
Many individuals are not aware that there is a separate system of courts for bankruptcy proceedings. So, while you may have to attend a court session, it will not be in the general courts used for civil and criminal cases. Typically, the individual will only have to appear around 3 times for the following:
- To submit the bankruptcy petition and financial documents;
- The mandatory 341 Meeting of the Creditors; and
- The bankruptcy hearing whether their bankruptcy request is granted or denied.
The 341 Meeting of the Creditors is typically scheduled 30 to 35 days following the filing of the bankruptcy. This meeting typically takes place in a meeting room instead of a courtroom. The meeting typically only lasts 5 to 10 minutes.
If there are no other issues, the trustee will approve the discharge of the debts and the individual should receive notice within 45 to 75 days. In some cases, the individual must appear for the judge to confirm the repayment plan, such as in a Chapter 13 bankruptcy, or to resolve any issues that arise.
What Types of Documents Do I Need to Prepare for a South Dakota Bankruptcy Filing?
The process of bankruptcy involves an examination of all of the debtor’s property and assets, which will involve a lot of documentation. Generally, documents that will be required include:
- Bank account statements;
- Credit card statements;
- Any other relevant financial documents;
- Loan documents, or home mortgage contracts;
- Business records, bookkeeping logs, and any other financial statements associated with the individual’s business, if applicable; and
- Any other paperwork that affects a debtor’s financial standing, such as:
- divorce records;
- tax documents;
- outstanding liens, and
- any other relevant documents.
What are Some other Legal Considerations When Filing for Bankruptcy in South Dakota?
There are other considerations for an individual to review prior to filing for bankruptcy in any state, including South Dakota. These include:
- Knowing the proper chapter of bankruptcy to file;
- Ensuring that they are eligible to file for that chapter;
- Ensuring the individual is not over the limit for the number of times they can file for bankruptcy within a certain period;
- Understanding the obligations they have under the particular chapter of bankruptcy that they choose to file for, including which debts will have to be paid and which nonexempt assets will have to be surrendered; and
- Being aware of updates or changes made to local, state, and bankruptcy laws, which may affect their case, debt obligations, and legal rights.
An individual filing for bankruptcy in South Dakota will be required to take two classes. Prior to filing, they are required to take a credit counseling course which is provided by an approved provider on the U.S. Trustee website.
In South Dakota, an individual filing for bankruptcy can choose to use the federal exemptions or state exemptions. Making this choice is complex and best done with the advice of an attorney.
Some of the most commonly used bankruptcy exemptions in South Dakota include:
- The homestead exemption, which includes all equity in the individual’s home if the property is less than 1 acre in town and less than 160 acres elsewhere. It also covers mobile homes larger than 240 square feet. Spouses cannot double this exemption;
- Personal property, including:
- Food and fuel to last 1 year;
- A bible and books up to $200;
- Other personal property;
- Wages that the individual earned within 60 days prior to the bankruptcy if needed to support a family;
- Pensions of public employees, city employees, and ERISA-qualified benefits up to the currently-allowed amount;
- Public benefits, including:
- Crime victim’s compensation;
- Public assistance;
- Unemployment compensation; and
- Worker’s compensation;
- Insurance, including:
- Life insurance proceeds up to $10,000 if the named beneficiary is a surviving spouse or child;
- Health benefits up to $20,000;
- Other benefits;
- Wildcard, which can be used for up to $5,000 of any personal property, not real estate. If the individual is the head of a family, they may exempt up to $7,000 of personal property.
It is important to note that there is no specific exemption for a vehicle in South Dakota. However, an individual may use South Dakota’s wildcard exemption to exempt the equity in their vehicle. There are also no tools of the trade exemption, but the wildcard exemption may be used.
This is not a complete list of all exemptions available in South Dakota. An individual should consult with an attorney to ensure they take advantage of all available exemptions.
Do I Need to Hire a South Dakota Bankruptcy Lawyer?
Yes, it is essential to have the assistance of an experienced South Dakota bankruptcy attorney for any bankruptcy issues you may have in South Dakota. Your attorney can review your financial situation, determine if and what chapter of bankruptcy you are eligible to file, and represent you during the proceedings. Having a lawyer can be your key to financial freedom.