January 23, 2019

When you don’t make enough to pay the bills, filing for bankruptcy in Iowa can be a good solution. Once you understand the differences between Chapter 7 and Chapter 13 bankruptcy, you’ll want to know:

• whether your income qualifies for the bankruptcy chapter you’ve chosen, and
• if you can protect your property using Iowa’s bankruptcy exemptions.

Find out about these things, and more, such as where to find the official bankruptcy forms, approved educational courses, and your local bankruptcy court.

Qualifying for Bankruptcy in Iowa—Means Testing

Once you know which chapter you’d like to file, you’ll determine whether you meet the chapter’s qualification requirements.

• Chapter 7 bankruptcy. You’ll meet income qualifications by passing the “means test.” If your household income is lower than the median income of your state, you pass and can receive a discharge in a Chapter 7 case. You might still pass the means test after subtracting allowed expenses.
• Chapter 13 bankruptcy. If your income exceeds the Chapter 7 limits, you can repay some or all of what you owe in a five year Chapter 13 repayment plan. The tricky part here is that you must have enough income to pay all required debts. To determine your Chapter 13 bankruptcy payment, you’ll do a calculation similar to that in Chapter 7. You’ll pay the greater of your disposable income, the value of your nonexempt property, or the amount of your nondischargeable debt (such as support obligations and tax debt).

The necessary income charts and expense guidelines are on the U.S. Trustee’s website (select “Means Testing Information”).

Protecting Property With Iowa’s Bankruptcy Exemptions

An important part of deciding the best chapter for you is determining whether you’ll lose property. Don’t worry—you won’t lose everything. In fact, you might not lose anything at all.

Finding out which assets you can protect is as simple as looking at Iowa’s bankruptcy exemption law. A list of federal bankruptcy exemptions exists, too, but Iowa doesn’t let residents choose between the two lists. You’ll use Iowa’s bankruptcy exemptions and the federal nonbankruptcy exemptions if they’re helpful.

Here's what will happen to nonexempt property (things you can’t protect with an exemption):

• In a Chapter 7 bankruptcy, the trustee appointed to manage your matter will sell any nonexempt property and distribute the proceeds to creditors according to the bankruptcy payment rules.
• By contrast, you can keep all of your property in a Chapter 13 bankruptcy. But, there’s a catch. You must pay the nonexempt property value to your creditors through the three- to five-year Chapter 13 repayment plan.
• Spouses who file together in Iowa can double the exemption amount in each category (except for the homestead) as long as both spouses have an ownership interest in the

Iowa’s Bankruptcy Exemption List

Here are some commonly used Iowa bankruptcy exemptions. Unless indicated, all references are to the Iowa Code.

Iowa Homestead Exemption

An unlimited value in one home or a one-unit apartment. Property located in a city or town is limited to one-half acre; forty acres elsewhere. (Iowa Code §§ 561.2, 561.16, 499A.18)

Iowa Motor Vehicle Exemption

Up to $7,000 in a motor vehicle. (Iowa Code § 627.6)

Iowa Wildcard Exemption

Up to $1,000 of any personal property (not real estate) including cash. (Iowa Code § 627.6(14))

Other Bankruptcy Exemptions in Iowa

These are additional types of property you’ll be able to protect.

• Alimony, support, and separate maintenance. Exempt if necessary for support (Iowa Code § 627.6(8)(d))
• Cemeteries and burial property. Up to one acre. (Iowa Code § 627.6)
• Liquor licenses. (Iowa Code Ann. 123.38)
• Fraternal benefit society benefits. (Iowa Code §§ 512B.18, 633.333)
• Insurance benefits. Public employee’s group insurance benefits; interest in a life insurance policy if the debtor’s spouse, child, or dependent is the beneficiary; group insurance; life insurance proceeds to $15,000 (conditions apply). (Iowa Code §§ 509.12, 509A.9, 511.37 and 627.6)
• Health and disability insurance. $15,000 (Iowa Code § 627.6)
• Pension and retirement benefits. Employee pension systems; Social Security and other pensions exempt to the extent necessary for support. (Iowa Code §§ 97A.12, 97B.39, 294.10B, 410.11, 411.13, 627.6, 627.8). (Other exemptions might also be available for retirement benefits. See Your Retirement Plan in Bankruptcy.)
• Personal property. Up to $7,000 in household goods, clothing, musical instruments; professionally prescribed health aids; up to $2,000 in jewelry; an engagement or wedding ring (if the rings were purchased after marriage and within the last two years, then the exemption is capped at $7,000, minus any amounts already used under the general jewelry exemption); up to $1,000 in private libraries, bibles, and paintings; one shotgun and either a musket or rifle; up to $1,000 in accrued wages and tax refunds. (Iowa Code § 627.6)
• Public assistance. 100% exempt, including earned income and child tax credits. (Iowa Code §§ 239B.6, 627.6, and 627.19)
• Trade implements. Up to $10,000 of trade implements. (Iowa Code § 627.6)
• Unemployment compensation. (Iowa Code §§ 96.15 and 627.6)
• Veterans’ benefits. (Iowa Code § 627.6)
• Workers’ compensation benefits. (Iowa Code § 627.13)
• Wages. 75% of disposable earnings or 40 times the federal minimum wage, whichever is greater. (Iowa Code §§ 642.21, 537.5105) Accrued wages and tax returns up to $1,000. Iowa also has a complicated alternative method of computing wages. (Iowa Code §§ 627.6, 627.11, 627.12, and 642.21)

Iowa adjusts its exemption amounts from time to time, and additional exemptions exist. Check for the most recent figures and other exemptions on the website for the Iowa Legislature or by speaking with a bankruptcy attorney.

More Iowa Bankruptcy Information

You’ll use this information when you’re ready to prepare your paperwork and file your case.

Iowa Credit Counseling and Debtor Education Information

Individual filers must take two financial courses—one before filing and another before receiving a discharge (debt forgiveness). Approved providers are listed under “Credit Counseling & Debtor Education” on the U.S. Trustee’s website (be sure to scroll down to your district).

Bankruptcy Costs, Filing Fees, and Forms

Most people must pay something to file for bankruptcy, but it’s usually worth the cost. Here’s what you can expect.

• Official bankruptcy forms. Before the Iowa bankruptcy court wipes out qualifying debt, you must disclose all aspects of your financial situation—income, expenses, property, debt, and property transactions—on official bankruptcy forms. These forms are free. After filling out the bankruptcy forms online on the U.S. Bankruptcy Court forms webpage, you’ll file your paperwork in your local bankruptcy court.
• Bankruptcy filing fees or fee waiver. You’ll pay a filing fee when you file your paperwork with the court unless you qualify for a fee waiver. Find out about both in Bankruptcy Filing Fees and Costs.
• Bankruptcy lawyer fees. The cost to hire a lawyer varies depending on the area. Many people benefit from retaining counsel. Find out the benefits of being represented by an attorney.

Iowa’s Bankruptcy Court Website and Location

You can contact the court clerk’s office if you need help determining where to file your case. Or, you can use the Court Locator tool. Click on the district name to go directly to the court’s website.

This overview cannot provide all of the information you’ll need to file a bankruptcy case. For more detailed information, consider consulting with a local bankruptcy lawyer or buying a self-help book such as How to File Chapter 7 Bankruptcy by Attorney Cara O’Neill and Albin Renauer J.D.