Federal law governs Chapter 7 and Chapter 13 bankruptcy proceedings in Iowa, as it does in every state. Where you live determines in which court you must file your bankruptcy. Iowa is divided into two judicial districts. Offices of the Northern District Court are located in Cedar Rapids and Sioux City, with divisions in Fort Dodge, Mason City and a few other locales. The Southern District Court is located in Des Moines.
Chapter 7 Bankruptcy
Once your bankruptcy is filed, the court issues an automatic stay, which prevents creditors from collecting any debt you owe. A Chapter 7 bankruptcy ends with a discharge of all obligations to the creditors listed in your bankruptcy filing. Debts which may be discharged include credit card bills, accounts in collection, medical bills, personal loans, attorney's fees, past due utility bills and civil court judgments -- with the exception of judgments for fraud. Some debts, such as student loans, crime restitution payments and child support, are not dischargeable. The bankruptcy trustee sells your assets and uses the money to pay your creditors.
Chapter 7 Income Requirement
To file a Chapter 7 bankruptcy in Iowa, your income must fall below the median Iowa income. This figure is calculated by the U.S. Census Bureau. If your income is above the Iowa median income, you may still be able to file a Chapter 7 bankruptcy if you successfully pass a "means test." This figure is calculated by taking your average income for the six month period immediately prior to the bankruptcy filing, minus certain deductions and expenses. Any remaining income is considered your "disposable income." If your disposable income is less than the limit established by the U.S. Bankruptcy Code, you may file for a Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Like a Chapter 7 bankruptcy, a Chapter 13 bankruptcy also gives an automatic stay to stop creditors. This stops any collection actions against you, during which time you may bring your payments current. Under a Chapter 13, your assets are not taken and sold to pay creditors; rather, you enter into a repayment plan, which must be approved by the bankruptcy judge. The plan payments last between three and five years, after which the judge orders the discharge of your remaining debts, canceling your obligations to unsecured creditors. Types of Chapter 13 debt that may be discharged after your repayment plan is complete are the same as for a Chapter 7 bankruptcy.
Certain property, known as "exempt" property, cannot be seized and used to pay your creditors in a Chapter 7 bankruptcy. For example, in Iowa, your home is exempt to an unlimited value, as is household furnishings and appliances up to $2,000 and clothing up to $1,000. Iowa state law does not allow the use of federal bankruptcy exemptions. Chapter 13 bankruptcy has the same exemptions as a Chapter 7. However, whereas the exemptions in a Chapter 7 determine what property you may keep, in a Chapter 13 bankruptcy, the exemptions help determine the amount you can afford to repay.
References & Resources
- United States Courts: Federal Court Locator
- Bankruptcy Information: Iowa Exemptions
- Mark A. Wortman, Attorney-At-Law: Chapter 7 Means Test
- United States Courts: Chapter 13 Individual Debt Adjustment
- Your Long Island Bankruptcy Lawyer: Paying Back Student Loans: A Love/Hate Relationship
- United States Courts: Chapter 7 Liquidation Under the Bankruptcy Code
- United States Courts: Discharge In Bankruptcy
- Bankruptcy Information: Federal Exemptions
- United States Bankruptcy Court: Map of Court Divisions
- United States Bankruptcy Court for the Southern District of Iowa: Home Page
- United States Bankruptcy Court for the Northern District of Iowa: Home Page
- Total Bankruptcy: State Median Income Limits