Filing bankruptcy in Iowa aims to achieve two things. First, it gives honest debtors a chance to be relieved of crippling debt, and second it repays creditors to the extent that the debtor’s property value or earnings permit. 9,639 bankruptcies were filed in Iowa in 2010, ranking Iowa 37th in the country for the number of bankruptcy filings per capita. 92% of Iowa’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.
Filing Bankruptcy in Iowa
Federal law governs bankruptcy proceedings in Iowa, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located at:
- Iowa Northern District Court – Cedar Rapids. Dubuque, Fort Dodge, Mason City
- Iowa Southern District Court – Council Bluffs, Davenport, Des Moines
Iowa law bans debtors from using exemptions listed in the U.S. bankruptcy code, instead requiring the use of Iowa bankruptcy exemptions. With the guidance of a bankruptcy attorney Iowa debtors can achieve a full understanding of what personal property they are permitted to keep in bankruptcy, and what must be sold.
Chapter 7 Bankruptcy, Iowa
Chapter 7 bankruptcies in Iowa are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who don’t have a significant amount of assets, such as investments and/ or substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Iowa’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Iowa’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.
The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.
Iowa Bankruptcy Exemptions
Iowa bankruptcy law assigns specific property exemptions that permit debtors to retain certain personal property and assets so they may move forward from bankruptcy as productive members of society. That is, the creditors cannot force debtors to sell the shirt off their backs. Bankruptcy in Iowa permits petitioners to choose exemptions from the state list.
Property exemption values are subject to change; for up-to-date information, it is prudent to meet with an Iowa bankruptcy attorney to discuss options. Iowa bankruptcy exemptions include:
Iowa Homestead Exemption
- May record homestead declaration
- Real property or an apartment to an unlimited value; property cannot exceed 1/2 acre in town or city, 40 acres elsewhere (Husband and wife may not double)
Iowa Personal Property Exemption
- $7,000 total: Clothing and its storage containers, household furnishings, appliances, musical instruments, and other personal property
- $2,000 total: Jewelry
- $1,000 total: Bibles, books, portraits, pictures and paintings
- $7,000 total: One motor vehicle to
- $500 total: Residential security or utility deposit, or advance rent
- $1,000 total: Tax refund and accrued wages
- $7,000 total: Wedding or engagement rings, if purchased after the date of marriage and less than two prior to years of filing.
- Health aids
- Rifle, musket or shotgun
- Burial plot to 1 acre
- Wrongful death proceeds and awards needed for support of debtor & dependents
Iowa Tools of the Trade Exemption
- $10,000 total: Farming equipment; includes livestock and feed
- $10,000 total: Non-farming equipment to
- National Guard articles of equipment
Iowa Wage Garnishment Exemption
- Expected annual earnings not exempt per year:
$0 to $12,000 — $250
$12,000 to $16,000 — $400
$16,000 to $24,000 — $800
$24,000 to $35,000 — $1,000
$35,000 to $50,000 — $2,000
More than $50,000 — 10%
- Not exempt from spousal or child support
- Wages or salary of a prisoner
Iowa Public Benefits Exemption
- Public assistance, Social Security
- Adopted child assistance
- Aid to dependent children
- Workers’ and Unemployment compensation
- Veterans’ benefits
Iowa Insurance Exemption
- Accident, disability, health, illness, or life proceeds or avails
- Disability or illness benefit
- Fraternal benefit society benefits
- Employee group insurance policy or proceeds
- Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
- Life insurance proceeds paid to spouse, child, or other dependent (limited to $10,000 if acquired within 2 years of filing for bankruptcy)
- $15,000 total: Upon death of insured, proceeds from all matured life, accident, health, or disability policies exempt from beneficiary’s debts contracted before insured’s death
Iowa Pensions and Retirement Savings Exemption
- Disabled firefighters, police officers (only payments being received)
- Peace officers, Police officers and Public employees
- Federal government pension
- Other pensions, annuities, and contracts fully exempt; however, contributions made within 1 year prior to filing for bankruptcy not exempt to the extent they exceed normal and customary amounts
- Retirement plans, Keoghs, IRAs, Roth IRAs and ERISA qualified benefits
Iowa Miscellaneous Exemption
- Alimony, child support needed for support
- Liquor licenses
Iowa Wild Card Exemption
- $1,000 total: Any personal property, including cash, not otherwise exempt
Chapter 13 Bankruptcy, Iowa
In 2010, 8% of petitioners filed for protection under Chapter 13 bankruptcy laws in Iowa. When a debtor files Chapter 13 bankruptcy in Iowa, a court-appointed Trustee restructures the petitioner’s debts and implements a 3-5 year repayment plan, assigning the debtor’s future earnings to repay creditors. Chapter 13 petitioners in Iowa keep most – or all – of their property.
How to File Bankruptcy in Iowa
Eligibility for property exemptions ought to play a considerable role in determining if bankruptcy is a practical answer to a debtor’s financial problems. The objective is to find a solution that will preserve major assets and qualify debts for discharge. Since every case is unique, an Iowa bankruptcy attorney can help debtors understand the complexity of their financial situations and advise whether Chapter 7 or Chapter 13 bankruptcy are among the best options in their circumstances.
Bankruptcy Attorney: Iowa
It is the debtor’s obligation to know their rights and duties as bankruptcy petitioners. An Iowa bankruptcy attorney can interpret and advise the federal laws and state exemptions for those considering filing bankruptcy. Because personal bankruptcy cases are complex and upsetting, the counsel and support of a trusted Iowa bankruptcy attorney is extremely valuable.