Some recomendations:
Tactical training would help.
Go slower, make sure before she moves she is aware of the other player posible attacs.
Rotate the board so she can see the game from the other point of view.
Don't be so hard, everybody does this sometimes.
It happens with all 7-year olds...and many 17, 27, 37, and 47 year olds.
I think there are two ways of going about resolving the issue.
1. Teach her a very simple thought process that she can follow on every move. Don't make it a long laundry list of things. It can be short as one item long: look for hanging pieces before you touch the piece. If you've already given her a laundry list of things to think about on each move, that could be a part of the problem.
2. Improve her ability to quickly recognize hanging pieces. Tactical puzzles as well as (this may shock you) blitz can be good in that regard.
A number of people have written books on thought process. Dan Heisman has written several. "Everyone's 2nd Chess Book" and "The Improving Chess Thinker" have lots of insights. Also "A Guide to Chess Improvement," a collection of his Novice Nook columns, touches on the topic a lot. However, I don't think that his recommendation that players check off items on a mental list is appropriate for a 7 year old.
Keep the 7-year olds thoughts simple and let the magic of pattern recognition do its work.
Almost forgot...have her do chess mazes of the type of the type found in Bruce Alberston's books: Chess Mazes, Chess Mazes 2.
You can find examples of his mazes online.
Looks like chessity has some chess mazes and other exercises to help with hanging pieces:
http://www.chessity.com/blog/303/Stop_hanging_pieces_1_2
Some players never stop hanging pieces, including world-class grandmasters.
World championship candidates' semi-finalist Robert Huebner hung his queen in two serious tournament games in one single month (and in both cases he actually moved his queen a considerable distance to nearly the only square where it could be captured immediately.
Twice world championship candidate, Pal Benko, was notorious for hanging a particular piece numerous times throughout his career. He always only gave away rooks gratis.
I am really not making any of this up.
She probably doesn't care. Maybe you should stop making her play.
Don't do anything for a month. Leave her alone.
If she doesn't play, she wont hang any pieces!
She probably either doesn't like chess and knows that if she hangs all her pieces the game'll be over sooner; or she finds chess boring and wants more action, ie pieces being taken.
I agree with yyoochess, she is still in the developing phase of learning the game, and teaching the correct thought process is critical at this point.
Chess is a slow, thinking game, especially when you start out. When you play a game with her, let her say out loud BEFORE playing any move (she must not touch the pieces):
1) What move do I wish to play.
2) If I make this move, will my piece be protected?
3) After I make this move, does my opponent have any checks (that could potentially lead to a tactic)?
4) Does my opponent have any captures?
5) Does my opponent have any threats?
Bye continuously following and cementing this thought process, it will become second nature after some time.
And yes, she should focus on tactics, and most of all just have fun playing. 
Maybe she's letting you win.
If you're teaching her, you just have to keep pointing it out until she gets it. Maybe make a weird alarm noise when she's about to leave something hanging, or give a slight warning when there is a two-mover that will check and then pick up a piece or something.
Hi,
So I am currently teaching a 7 year old chess. She knows all the rules and can play a game of chess, but the problem is that she keeps hanging all of her pieces. She knows the value of all the pieces and knows when she makes a bad move when we go over her games, but she keeps hanging pieces. Does anyone have book recomendations? Does it just require time and practice? What should we do during our lessons so that she stops hanging so manny pieces?