Chapter 7 of the Bankruptcy Code provides for liquidation—the sale of the debtor’s nonexempt property and the distribution of the proceeds to creditors. A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13.

Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors.

In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

In South Dakota, as in other states, Chapter 7 of the Bankruptcy Code is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Under Chapter 7 bankruptcy, individuals can discharge most of their unsecured debts by liquidating their nonexempt assets through a bankruptcy trustee. The trustee sells these assets and distributes the proceeds to the creditors. South Dakota has its own set of exemptions that determine what property a debtor can keep; these may include equity in a home, personal property, tools of the trade, and certain pensions, among others. It's important to note that some assets may be secured by liens, such as mortgages on a home or loans on a car, which means those assets can be repossessed by the creditor. Filing for Chapter 7 bankruptcy in South Dakota can lead to the loss of property, but it also provides a way for debtors to eliminate their debts and make a fresh start. Debtors considering Chapter 7 should consult with an attorney to understand the specific implications for their property and debts.