Is Bankruptcy The Best Answer For South Dakota Residents?
As of 2021, South Dakota’s total state debt was approximately $1.6 billion, which includes both general obligation debt and revenue bond debt. According to data from the US Census Bureau, as of 2019, South Dakota’s per capita debt was $2,387, which is lower than the national average of $3,521. According to data from the US Bankruptcy Court for the District of South Dakota, there were a total of 1,325 bankruptcy filings in South Dakota in 2020. Of these, 1,229 were non-business filings, while the remaining 96 were business filings. In terms of the type of bankruptcy filed, the majority of filings in South Dakota were Chapter 7 bankruptcies, which accounted for 72% of all filings in 2020. Chapter 13 bankruptcies accounted for 26% of filings, while Chapter 11 and Chapter 12 bankruptcies each made up less than 1% of total filings.
South Dakota Bankruptcy Laws
Bankruptcy laws in South Dakota are governed by the federal Bankruptcy Code, which provides a legal process for individuals and businesses to eliminate or restructure their debts. In addition to federal law, South Dakota has its own bankruptcy exemptions that allow debtors to protect certain assets from being seized by creditors in the bankruptcy process.In South Dakota, bankruptcy cases are handled by the US Bankruptcy Court for the District of South Dakota, which has offices in Sioux Falls, Rapid City, and Aberdeen. Individuals and businesses in South Dakota may file for bankruptcy under Chapter 7, Chapter 11, or Chapter 13 of the Bankruptcy Code. Chapter 7 bankruptcy involves the liquidation of assets to pay off debts, while Chapter 11 bankruptcy allows businesses to restructure their debts and continue operating. Chapter 13 bankruptcy is a reorganization plan for individuals with regular income that allows them to pay off debts over a period of time. To file for bankruptcy in South Dakota, debtors must complete credit counseling from a court-approved agency and file a petition with the US Bankruptcy Court. A trustee will be appointed to oversee the bankruptcy process and work with the debtor and creditors to determine how debts will be repaid or discharged.
Learn More about the 3 main types of bankruptcy
Things To Keep in Mind if You Are Considering Business Bankruptcy
If you are considering filing for business bankruptcy in South Dakota, there are several important things to keep in mind:
- Bankruptcy should be a last resort: Filing for bankruptcy should only be considered after all other options for managing debt have been exhausted. It’s important to explore other options, such as negotiating with creditors or restructuring debt, before considering bankruptcy.
- Consider the different types of bankruptcy: There are several types of bankruptcy available for businesses, including Chapter 7, Chapter 11, and Chapter 13. Each has its own advantages and disadvantages, so it’s important to consult with a bankruptcy attorney to determine which option is best for your specific situation.
- Understand the bankruptcy process: The bankruptcy process can be complex and time-consuming, so it’s important to understand what will be required of you and your business. This may include filing paperwork, attending court hearings, and working with a trustee to develop a repayment plan.
- Consider the impact on your business and stakeholders: Bankruptcy can have a significant impact on your business, as well as your employees, customers, and other stakeholders. It’s important to consider the potential consequences of bankruptcy and how they may affect your relationships and reputation.
- Work with an experienced bankruptcy attorney: Filing for bankruptcy can be a complex and daunting process, so it’s important to work with an experienced bankruptcy attorney who can guide you through the process and help you make informed decisions about your options.
Are All Debts Discharged?
While bankruptcy can be an effective way to eliminate or reduce certain types of debts, not all debts can be discharged through bankruptcy. Here are some examples of debts that generally cannot be discharged in bankruptcy:
- Taxes: Certain tax debts, including income taxes that are less than three years old, cannot be discharged in bankruptcy.
- Student loans: Most student loan debt cannot be discharged in bankruptcy, although there are some exceptions for borrowers who can demonstrate undue hardship.
- Child support and alimony: Court-ordered child support and alimony payments cannot be discharged in bankruptcy.
- Debts arising from fraud or intentional wrongdoing: Debts that were incurred as a result of fraud, embezzlement, or other intentional wrongdoing cannot be discharged in bankruptcy.
- Fines and penalties: Debts owed for fines, penalties, or other criminal restitution cannot be discharged in bankruptcy.
- Debts incurred after filing: Any debts incurred after the bankruptcy petition is filed will not be discharged in the bankruptcy.
What Happens To Your Credit Score and The Ability To Get a Future Loan
Filing for bankruptcy in South Dakota can have a significant impact on your credit score and ability to obtain future loans. A bankruptcy filing will remain on your credit report for up to 10 years, and may make it more difficult to obtain credit or qualify for loans in the future. Bankruptcy can have different effects on credit scores, depending on the individual’s credit history and financial situation. In general, a bankruptcy filing can cause a significant drop in credit score, but the exact impact will depend on the individual’s credit history prior to the bankruptcy. In addition to affecting your credit score, bankruptcy can also make it more difficult to obtain loans in the future. Many lenders are hesitant to extend credit to individuals with a bankruptcy on their record, and those who do may offer less favorable terms or higher interest rates.
Are Tax Debts Discharged?
Bankruptcy in South Dakota can affect tax debts in different ways, depending on the type of tax debt and the specific circumstances of the case. In general, income tax debts can be discharged through bankruptcy, but only if certain conditions are met. The tax debt must meet the following criteria:
- The tax debt is for income taxes only. Other types of taxes, such as payroll taxes or fraud penalties, cannot be discharged in bankruptcy.
- The tax debt is at least three years old. The tax return must have been due at least three years before the bankruptcy filing.
- The tax return was filed at least two years before the bankruptcy filing. The debtor must have filed a tax return for the tax debt at least two years before filing for bankruptcy.
- The tax assessment is at least 240 days old. The tax assessment must have been made by the IRS at least 240 days before filing for bankruptcy.
If these conditions are met, the income tax debt may be discharged in bankruptcy. However, it’s important to note that not all tax debts will be discharged, and the specific circumstances of the case may affect the outcome.
What Happens To Your Assets?
Whether or not you will lose your home or car in bankruptcy in South Dakota will depend on several factors, including the type of bankruptcy you file, the amount of equity you have in your home or car, and whether or not you are current on your mortgage or car loan payments. Chapter 7 bankruptcy, also known as liquidation bankruptcy, can result in the loss of your home or car if you have significant equity in the property that cannot be protected by exemptions. However, South Dakota offers a homestead exemption that can protect up to $60,000 of equity in your primary residence. In addition, South Dakota also offers a motor vehicle exemption that can protect up to $7,000 of equity in your car or other vehicle. If you are current on your mortgage or car loan payments and you continue to make those payments, you may be able to keep your home or car through the bankruptcy process, even if you have significant equity. However, if you are behind on your payments, your lender may be able to foreclose on your home or repossess your car. Chapter 13 bankruptcy, also known as reorganization bankruptcy, may be a better option for those who want to keep their home or car. In a Chapter 13 bankruptcy, you will be able to create a repayment plan that allows you to catch up on missed mortgage or car payments over a period of three to five years. As long as you make these payments on time, you will be able to keep your home or car.
Statute of Limitations for Collections in South Dakota
In South Dakota, the statute of limitations for collections is generally six years from the date of default or the last payment on a debt. This means that creditors have up to six years to file a lawsuit against a debtor to collect a debt. Once the statute of limitations has expired, the creditor cannot sue the debtor to collect the debt. It’s important to note that the statute of limitations may vary depending on the type of debt, and certain actions can restart the clock on the statute of limitations. For example, making a partial payment on a debt or acknowledging the debt in writing can restart the statute of limitations. In addition, the statute of limitations only applies to the creditor’s ability to file a lawsuit to collect the debt. It does not prevent the creditor from attempting to collect the debt through other means, such as phone calls or letters.
Consider The Cons
While bankruptcy can provide relief from overwhelming debt, there are also some potential drawbacks and negative consequences to consider. Here are some of the cons of bankruptcy in South Dakota:
- Damage to credit score: Bankruptcy will have a significant impact on your credit score, and it will stay on your credit report for up to 10 years. This can make it more difficult to get approved for loans or credit cards in the future, and you may be required to pay higher interest rates.
- Loss of assets: Depending on the type of bankruptcy you file and the amount of equity you have in your assets, you may be required to surrender certain assets to the bankruptcy trustee to be sold to pay off your debts.
- Stigma and social impact: Bankruptcy can carry a stigma, and some people may feel embarrassed or ashamed about filing for bankruptcy. It may also impact your ability to rent an apartment or find employment in certain industries.
- Cost of filing: Filing for bankruptcy can be expensive, and there are several fees and costs associated with the process. You may also need to pay for legal representation if you choose to work with a bankruptcy attorney.
- Limitations on future credit: Even after your bankruptcy is discharged, you may still face limitations on your ability to obtain credit or loans, and you may be required to pay higher interest rates.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Regret Filing Bankruptcy
While bankruptcy can provide relief from overwhelming debt, there are some reasons why people may regret filing for bankruptcy. Here are some common reasons:
- Damage to credit score: Bankruptcy can have a significant impact on your credit score, and it can stay on your credit report for up to 10 years. This can make it more difficult to get approved for loans or credit cards in the future, and you may be required to pay higher interest rates.
- Loss of assets: Depending on the type of bankruptcy you file and the amount of equity you have in your assets, you may be required to surrender certain assets to the bankruptcy trustee to be sold to pay off your debts.
- Stigma and social impact: Bankruptcy can carry a stigma, and some people may feel embarrassed or ashamed about filing for bankruptcy. It may also impact your ability to rent an apartment or find employment in certain industries.
- Limited options for future credit: Even after your bankruptcy is discharged, you may still face limitations on your ability to obtain credit or loans, and you may be required to pay higher interest rates.
- Emotional toll: Bankruptcy can be emotionally challenging, and it may take a toll on your mental health and well-being. It can be stressful and overwhelming to deal with the legal and financial aspects of bankruptcy, and it can impact your relationships and self-esteem.
What Are The Alternatives To Bankruptcy?
If you do not qualify for bankruptcy in South Dakota, there may be other options available to you to help address your debt issues. One of which is debt settlement. Debt settlement involves negotiating with creditors to settle debts for less than the full amount owed. There are some potential benefits to debt settlement over bankruptcy that may make it a more favorable option for some individuals.
- No BK on your credit report: Filing for bankruptcy shows on your credit report for up to 10 years. On the other hand, debt settlement does not show as a bankruptcy.
- Cost: Filing for bankruptcy can be expensive, with filing fees, attorney fees, and other costs adding up quickly.
- Emotional Impact: People report horror stories of the negative emotional impact of BK.
- With a bankruptcy for the rest of their life: Employers or lenders can ask if someone has filed BK for the rest of their life. It is much less likely to be asked if one ever used debt settlement to pay back an agreed to amount.
- Control: With debt settlement, you may have more control over the process and negotiations with your creditors, whereas with bankruptcy, a court will make the final decision.
- Less severe consequences: Filing for bankruptcy can have significant consequences, such as the liquidation of your assets, whereas debt settlement may allow you to negotiate a more manageable repayment plan while keeping your assets.
Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help
CuraDebt – An Alternative To Consider
CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328