SIOUX FALLS, S.D. – While post-pandemic Chapter 11 business bankruptcy filings in South Dakota are down, the number of business closures and Chapter 12 filings, common with farmers, have risen.
Between 2019 to 2026, 292 businesses in South Dakota filed for bankruptcy. Compared to most other states, South Dakota's business bankruptcy filing levels are lower.
A report published by The Kaplan Group, a commercial collection agency based in Los Angeles, found that among the 50 states, Connecticut, Kentucky and South Dakota remained well below their pre-pandemic bankruptcy levels in 2025.
More businesses closing down in Chapter 7, rather than restructuring
However, after briefly decreasing between 2022 and 2024, more businesses are filing Chapter 7 bankruptcies, also referred to as liquidation.
"Since the last few years, there's been more businesses that have just decided to wrap it up and close it down, rather than attempt to restructure," said Clair Gerry, a bankruptcy attorney in Sioux Falls.
Currently, Chapter 7 filings are the most common in South Dakota, totaling 125 cases between 2019 and 2026.
Chapter 13 filings more successful in SD
Second most common in South Dakota are Chapter 13 filings, allowing an individual to repay their debts back over time, usually between three and five years.
Between 2019 and 2026, there were 77 cases of businesses filing a Chapter 13 bankruptcy.
According to Robert Miller, an associate professor of law at the University of South Dakota in Vermillion, Chapter 13s typically have high failure rates nationwide.
"From an academic perspective, (Chapter 13s) have been considered largely a failure," he said. "But South Dakota, over the years, has been extremely successful."
Chapter 11 reorganization filings peaked in 2021
Less common are Chapter 11 filings, a legal process allowing for reorganization to keep a business alive. During this seven-year timeframe, there were 28 cases filed under Chapter 11, peaking in 2021 at seven total.
Miller said a reason for this may be because Chapter 11 filings are a more expensive undertaking.
"It's a very detailed process, and it requires usually a significant retainer for the attorney, maybe some financial advisers, and that can be a huge upfront outlay for an entity," Miller said. "It may just make more sense to liquidate and then start a new company rather than try to reorganize and incur all of that cost, or maybe you don't have the cash to do that."
Chapter 12 filings common option for farms
On the rise are Chapter 12 filings, specifically reserved for family farmers with a regular annual income, allowing them to propose and carry out a plan to repay all or part of their debts.
"For certain states that may not be agrarian, like South Dakota, the business filings would be the Chapter 11s. While for a state like South Dakota, where agribusiness is a huge part of the state's economy, and a lot of the big businesses, or at least the small, medium-sized businesses that would count within that Chapter 11 number are instead going to be Chapter 12s," Miller said.
Data from the American Bankruptcy Institute shows that Chapter 12 filings in South Dakota peaked in 2020 at 20 total cases. In comparison, only five Chapter 11 cases were filed in 2020.
Miller said one reason Chapter 12s are a common option among farmers is due to tax incentives, whereas a Chapter 7 filing may be a better move for farmers looking for a fresh start.
"Even if you're going to liquidate a farm, there are tax benefits to a Chapter 12 that would lead me to believe that you would at least try finagle your way into a Chapter 12," Miller said.
Insights: Businesses may consider exit plans
For businesses that may not want to file for bankruptcy, they may consider adapting a different exit plan.
Katie Johnson, co-founder of Next Phase Strategy Partners – a professional transition, exit planning and business advisory firm – said only a small number of businesses actually transit or exit successfully and the rest of them tend to liquidate.
She said the main reason for that is they are not planning in advance.
"Unfortunately, most people coordinate their own exit, and they don't feel great about how the exit went down, so what we're really trying to do is educate people about (exiting as an option)," Johnson said.
South Dakota News Watch is an independent nonprofit. Read, donate and subscribe for free at sdnewswatch.org. Elena Tittel's internship was funded with support from the Nonprofit Newsroom Internship Program created by The Scripps Howard Fund and the Institute for Nonprofit News. Contact: elena.tittel@sdnewswatch.org.
