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Purchase money security interests remain enforceable against family
homes, despite the South Dakota homestead exemption law. The extent of
protection of exempt property is determined by the South Dakota Homestead Exemption Act,
which establishes a maximum value of $30,000 as the upper limit of
equity included, based on fair market appraisal, net of all valid liens
and attached security interests.
However, although mortgage liens, mechanic's liens, and tax liens may
all defeat the exemption, debtors who file Chapter 13 bankruptcy may
include past due payments into the plan. Once the Chapter 13 plan is
confirmed, all past due payments are presumed current which prevents
foreclosure. Debts that may be included within the plan include
mortgages, IRS taxes, state and local taxes, and liens for home
improvements. Any contractual clause contained in financing documents
that accelerates the total owed or declares default because of filing
bankruptcy are expressly unenforceable by federal law, despite a
lender's clear intention to the contrary.
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