In general, bankruptcy exemptions are the basic assets that debtors who file for bankruptcy are permitted to keep because they have been deemed as necessities by various bankruptcy laws. Each state has its own exemption schedule that dictates what types of property a debtor can retain after declaring bankruptcy. The chapter of bankruptcy that a debtor files for will also affect what kinds of property they will be able to preserve.

For example, the exemptions for a Chapter 7 Bankruptcy will help separate which property a debtor is allowed to keep and what can or must be sold off to the creditors. On the other hand, exemptions in a Chapter 13 Bankruptcy are more concerned with how much a debtor may have to pay their unsecured creditors. 

To learn more about how bankruptcy and bankruptcy exemptions work in your state, you should contact a local bankruptcy lawyer for further advice.

What is a Property Exemption?

Generally speaking, bankruptcy exempt properties refer to any type of property that cannot be seized by creditors as a means of satisfying a borrower’s debts. In contrast, property that can be taken by creditors to pay off a borrower’s debts is called, “non-exempt” property. These definitions and what qualifies as exempt or non-exempt property will vary by state.

Property that is typically exempt after a bankruptcy proceeding includes pensions, clothing, household appliances, motor vehicles, jewelry (up to a specified value), and any equipment that is necessary to perform a job. Thus, if listed under the bankruptcy law in the debtor’s state, a creditor will not be able to seize any of these items. 

However, a creditor will be able to seize non-exempt property to pay down a borrower’s debts, such as bank accounts, cash, family heirlooms, vacation homes, and/or additional motor vehicles.

Bankruptcy Property Exemptions in South Dakota

According to the U.S. Bankruptcy Code, each state has discretion to determine which assets are exempt when a debtor files for bankruptcy. The state may either create its own list of bankruptcy property exemptions that a debtor will need to review or a state may give a debtor the option of choosing between federal or that state’s exemptions. In states that offer both options, the debtor may only choose one of the two sets of exemptions (e.g., federal vs. state exemptions).

South Dakota bankruptcy laws require a debtor to use its state mandated property exemptions (as opposed to federal or providing a choice). In particular, any debtor who has lived in South Dakota for at least two years by the time they file for bankruptcy, must ignore all federal bankruptcy exemptions and only adhere to the state. 

As of 2020, some current bankruptcy property exemptions in South Dakota include the following:

  • South Dakota homestead exemption: Regardless of whether a debtor is filing as an individual or jointly as a married couple, a special rule called the doubling rule does not apply to homesteads. In other words, the homestead exemption cannot be doubled. The following may be exempt:

    • Homestead property of less than one acre (in a town or city) and less than 160 acres if situated in a rural area; and
    • Mobile homes that are larger than 240 square feet and registered with the state at least six months prior to filing.
  • Personal property exemptions: South Dakota does not allow for many personal property exemptions due to its general wildcard category, which will be discussed in further detail below.

    • Burial plots and/or other cemetery property;
    • Bibles, books, textbooks, etc. (up to $200);
    • Food and fuel for up to one year;
    • Photos;
    • Health devices or aids prescribed by a physician; and
    • Church pews.
  • Monetary Asset exemptions: Only certain monetary assets are exempt under state law. If the asset is exempt, then it will be exempt for the full value of the asset.

    • Wages:

      • Wages earned 60 days prior to filing for bankruptcy if necessary to support self or family; and
      • Wages earned by inmates enrolled in prison work programs.
    • Insurance:

      • Life insurance proceeds that cannot be used to pay off creditors;
      • Life insurance proceeds left to a surviving spouse or child (up to $10,000);
      • Health benefits (up to $20,000);
      • Fraternal society benefits; and
      • Proceeds from annuity contracts (up to $250 per month).
    • Public benefits:
    • Pensions and retirement:

      • Pensions for both city and other public employees;
      • Retirement accounts that are tax exempt; and
      • ERISA benefits (up to $1,000,000). 
    • Alimony and/or child support:

      • Alimony and/or child support and maintenance for up to $750 per month.
  • Miscellaneous property exemptions: Property of a business partnership (e.g., limited or general partnership).
  • Wildcard exemptions: Wildcard exemptions refer to an exemption of personal property that is chosen by the debtor. For instance, if after creating a list there is still property leftover that does not fit into one of the above exemption categories, then the debtor should check if they can have it exempted either in full or in part. 

    • Debtors in South Dakota can claim up to $5,000 extra in personal property if they file as an individual, and up to $10,000 in additional value if they file jointly as a married couple. Additionally, if an individual is also the head of their household, they may be able to claim up to $7,000 in other exemptions.

If after reviewing local laws the debtor is still uncertain about what items of property will qualify for exemption, they should speak to a South Dakota bankruptcy lawyer immediately. This is especially true in cases where a married couple is filing for bankruptcy because the amounts in the above list may be higher for certain assets. A lawyer can provide this additional information and can ensure that debtors calculate the right properties for exemption purposes. 

What Else Should I ConsiderWhen Filing for Bankruptcy in South Dakota?

There are many other rules about property exemption in South Dakota, such as the size of homesteads and different kinds of housing that may be exempt. These can all be found in the list provided by South Dakota’s bankruptcy laws, specifically, the list about state exemptions. 

Another important factor that a debtor in South Dakota should consider before filing for bankruptcy is which chapter they will qualify for: Chapter 7 or Chapter 13? The median income level in South Dakota for a household in which only a single individual resides is currently at $47,906 annually, and $3,992.17 per month. 

If a debtor lives alone, makes a salary that is equal to or below these amounts, and has no disposable income, they will be eligible to file for Chapter 7 Bankruptcy in South Dakota. If they do not satisfy these standards and they also do not fall into one of the state’s exceptions, then they may need to file for Chapter 13 Bankruptcy instead. To be certain, a debtor should speak to a local bankruptcy attorney before filing any documents in court.

Do I Need a Bankruptcy Lawyer?

Filing for bankruptcy requires an understanding of complex laws and intricate legal procedures. Property exemption happens to be one major component of filing for bankruptcy and it must be done correctly or else it can result in seizure of property that should be exempt. The bankruptcy laws in South Dakota are particularly complicated when it comes to property exemptions since the state has created its own detailed list. 

Therefore, if you need assistance with filing for bankruptcy or have questions about bankruptcy property exemptions in South Dakota, you should contact a South Dakota bankruptcy lawyer for further guidance. Your lawyer will be able to answer any questions you may have about the process and can go over the types of properties that may be exempt based on the chapter of bankruptcy you are filing.

In addition, your lawyer can also make sure that you accurately divide your assets for exemption purposes, help you in securing your property, and can provide representation at your bankruptcy hearing if necessary.