{"id":286849,"date":"2021-04-22T07:36:36","date_gmt":"2021-04-22T12:36:36","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/bankruptcy-laws-by-state\/iowa-bankruptcy-exemptions-and-law.html"},"modified":"2021-04-23T09:39:53","modified_gmt":"2021-04-23T14:39:53","slug":"iowa-bankruptcy-exemptions-and-law","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/bankruptcy-laws-by-state\/iowa-bankruptcy-exemptions-and-law.html","title":{"rendered":"Iowa Bankruptcy Exemptions and Law"},"content":{"rendered":"\n
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Iowa Bankruptcy Exemptions and Law<\/h1>\n
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\n By J.P. Finet, J.D.<\/a> | Legally reviewed by Bridget Molitor, JD<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Why File for Bankruptcy?
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When someone files for personal bankruptcy, Americans can be quick to label that person as someone who rang up large consumer debts with out-of-control spending habits. But there are many situations where you may end up facing bankruptcy despite careful management of your finances.<\/p>\r\n

For example, a large percentage of personal bankruptcies are the result of medical bills that the patient could not pay off. Additionally, some people find themselves with overwhelming debt when they lose what had been a steady job. Finally, you may have lost a lawsuit that requires you to pay damages that you cannot afford.<\/p>\r\n

However you ended up in debt, filing for bankruptcy is often the first step in resolving your payment obligations so you can move on with your life. Bankruptcy forces your creditors to stop their collection actions and gives you the breathing room you need to resolve your debt problems either through a payment plan or by eliminating your debt entirely.<\/p>\r\n

<\/a>Iowa Bankruptcy Law<\/h2>\r\n

When you file for bankruptcy in Iowa you will do so in one of the state’s two federal bankruptcy courts. While the U.S. Bankruptcy Code<\/a> governs those courts, they must take into account Iowa’s rules regarding what property you can protect from your creditors. You can keep that \u201cexempt" property to help you move on with your life after you have finished with your bankruptcy case.<\/p>\r\n

The Bankruptcy Code also provides a list of federal exemptions<\/a>, but when you file for bankruptcy in Iowa, you must use the state exemptions. Fortunately, in most situations, the Iowa exemptions are more generous than those offered under federal law.<\/p>\r\n

Which Type of Bankruptcy Should I Choose?<\/h2>\r\n

Nearly everyone who files for personal bankruptcy will do so under one of two chapters in the Bankruptcy Code: Chapter 7<\/a> or Chapter 13<\/a>. Both chapters will allow you to resolve your debt issues, but each does so through a different process. Knowing how bankruptcy works under each chapter will help you determine which one is best for your financial situation and what assets you will be able to keep.<\/p>\r\n

Chapter 7 Bankruptcy<\/h3>\r\n

Chapter 7 is the most common type of personal bankruptcy and is available to people whose disposable income<\/a> is below certain levels. Chapter 7 is often called a \u201cliquidation" bankruptcy because you will turn over most of your property that is not protected by an exemption to a trustee who will sell it to repay your creditors. Essentially, your non-exempt assets will be liquidated to pay your creditors.<\/p>\r\n

In return for giving up your non-exempt assets, in a Chapter 7 case, the bankruptcy court will discharge almost all of your unpaid debt, leaving you debt-free while still owning your exempt property. Chapter 7 is also relatively quick, with judges often discharging your debts within four or five months of filing for bankruptcy.<\/p>\r\n

Chapter 13 Bankruptcy<\/h3>\r\n

Chapter 13 bankruptcy forces your creditors to work with you to create a payment plan that will pay off your debts over three to five years. Before the court approves the plan, you will need to show that you have a steady source of income that will let you make the required payments under the plan.<\/p>\r\n

Your Chapter 13 plan may require your creditors to reorganize their debts so they are paid off over the term of the plan. It can even force some of your creditors to accept payments that are less than what you owe.<\/p>\r\n

The Automatic Stay Protects You From Creditors<\/h2>\r\n

When you file for any type of bankruptcy, the court will automatically issue a stay to stop your creditors from undertaking any collection activity. This should put an end to harassing phone calls, foreclosures, and lawsuits so that you can resolve your debt problems through the bankruptcy process.<\/p>\r\n

The stay has the added benefit of forcing your creditors to participate in the bankruptcy process. If a creditor tries to contact you outside of bankruptcy in an attempt to collect what they are owed the judge can impose penalties and even force your creditor to pay your attorneys’ fees.<\/p>\r\n

Secured vs. Unsecured Debt<\/h2>\r\n

While you likely see your personal debt as just bills you are unable to pay, there are several categories of debt and they each receive different treatment in bankruptcy. The two most common types are secured<\/a> and unsecured<\/a> debt. How much of each type you have will likely control the amount of debt you can shed during bankruptcy and how much property you will keep.<\/p>\r\n

Unsecured Debt<\/h3>\r\n

You have unsecured debt when you owe money to a creditor who has no right to repossess your property for non-payment. In other words, the creditor holds no security interest in your property. Most people who file for bankruptcy have at least some unsecured debt, with some of the most common types being credit card debt, unpaid medical bills, and outstanding court judgments.<\/p>\r\n

Secured Debt<\/h3>\r\n

With secured debt, your creditors have the right to repossess or seize specific property if you fail to pay. Often, the security interest is created when you sign a contract with a lender pledging some of your property as collateral for the loan. Mortgages and car loans are among the most common types of secured debt in personal bankruptcies.<\/p>\r\n

Secured and Unsecured Debt in Chapter 7<\/h3>\r\n

After you have turned over your non-exempt assets to a trustee and they have been sold, those funds are distributed among your unsecured creditors. Any unsecured debt that remains after payment has been made will be discharged and you will no longer owe those creditors anything. In most Chapter 7 cases, the debtor has few \u2014 if any \u2014 assets, and the unsecured creditors receive almost nothing.<\/p>\r\n

However, not all unpaid unsecured debt will be discharged in bankruptcy. If you have \u201cpriority" unsecured creditors, you will be required to pay them, even after all of your other unsecured debts have been discharged. Examples of priority unsecured debt are unpaid child and spousal support obligations.<\/p>\r\n

Secured creditors fair better in most Chapter 7 cases. That is because they retain their security interest in your property during bankruptcy. While the automatic stay may stop them from seizing your property for a time, eventually you will need to take one of three actions:<\/p>\r\n