How to File Bankruptcy in Iowa

 

Learn the step-by-step process of how to file bankruptcy in Iowa with the expert guidance of Henkels & Baker PC. Contact us today for assistance.

Filing Bankruptcy in Iowa

If you are struggling and your debts are piling up, filing for bankruptcy might be the solution. Although many may view it as the end, bankruptcy can actually give you a fresh start.

Filing bankruptcy is a legal debt relief option. It can help manage your debt, protect you from creditors, and help you get back on your feet. However, we understand that the filing process can be a bit daunting and time-consuming. It is not tailored for those with little to no legal knowledge.

It’s crucial to carefully follow the process as required by law and court rules to ensure your case won’t be dismissed or delayed. An experienced bankruptcy attorney can guide you throughout the process and ensure you receive the anticipated discharge.

If you want to learn more about the Iowa bankruptcy filing process, keep reading.

How Does Bankruptcy in Iowa Work?

In most aspects, Iowa bankruptcy filing is the same as filing in another state because the process is governed by federal law. However, it is the Iowa state law that determines which property the debtor can keep in a bankruptcy case.

Bankruptcy is designed to help debtors reorganize their finances and gives them certain protections that are typically unavailable outside the bankruptcy process. At the end of a successful bankruptcy case, the debtor may end with little to no debts. However, not all debts can be discharged.

Unsecured debts such as those listed below can be discharged through bankruptcy.

  • Medical bills
  • Credit card debt
  • Old utility bills
  • Personal loans

On the other hand, secured debts can’t be discharged. These debts include child support, tax debt, debts to the government, as well as fines and debts related to personal injury cases.

 

What’s the First Step to Filing for Bankruptcy in Iowa?

Under the U.S. Bankruptcy Code, the debtor must take a credit counseling course before bankruptcy filing. During the course, the debtor can learn their debt relief options and more about Chapter 7 and Chapter 13 bankruptcy. That way, a debtor can decide what type of bankruptcy would be best for their situation.

The course must be completed within 180 days before filing for bankruptcy. After completion, the debtor will receive a certificate that can be included with other bankruptcy documents when filing.

 Steps to Iowa Bankruptcy Filing

The bankruptcy process includes the following steps:

  • Collecting bankruptcy documents
  • Submitting a petition to the bankruptcy court
  • Attend the 341 meeting with creditors
  • Taking the debtor education course
  • Receiving discharge

Let’s look closely at each step.

Collecting the Necessary Bankruptcy Documents

When filing for bankruptcy, you are required to prepare and submit a lot of financial documents. Required documents can include:

  • Tax returns from the last two or four years, depending on the Chapter you are filing under
  • Paycheck stubs or other proof of income
  • Bank statements from the last two to six months

You will also have to compile information about debts, expenses, and property values. Any statements from creditors or letters from collection agencies can be helpful when compiling this information.

Submitting a Bankruptcy Petition

You can submit your petition to the bankruptcy court once you have gathered the necessary documents and filled out the required forms. The Iowa Bankruptcy Court is divided into the Northern District and Southern District of Iowa. Make sure you submit your petition to the court covering your area. You will also have to pay a filing fee.

After filing, it will take a few days for the court to mail your creditors the notice of automatic stay. That means they have to stop any collection actions against you.

Also, the bankruptcy court will assign a bankruptcy trustee to oversee and administer your case. You must send bankruptcy documents to your trustee before meeting with creditors.

Attending the 341 Meeting With Creditors

The trustee will schedule a meeting with the debtor and creditors. The debtor will answer questions from creditors or the trustee under oath about the information you included in your bankruptcy forms and your debt repayment plan, if any. In some cases, the trustee will be the only one present.

Taking the Debtor Education Course

The debtor has to complete this course within 60 days after the meeting with creditors. The course covers topics involving the management of personal finances. Failing to do so will result in the court dismissing the bankruptcy case. After finishing the course, the debtor will get the certificate that must be filed with the court.

Receiving Discharge

After the successful completion of these steps, the bankruptcy court judge will decide whether or not you qualify for a discharge. If granted, you will be relieved of any remaining, qualified debts.

How to Choose the Right Bankruptcy Type in Iowa?

When it comes to personal bankruptcy, individuals can choose between Chapter 7 or Chapter 13.

Chapter 7 bankruptcy can work well if you don’t have a lot of income and don’t own luxury items. The bankruptcy trustee can sell the nonexempt property, which will be liquidated to pay off the creditors. In return, the bankruptcy court will discharge most of the remaining unpaid debt.

Fortunately, Chapter 7 filers may use bankruptcy exemptions to keep a homestead, a vehicle, and certain pieces of personal property. Iowa doesn’t allow using federal exemptions unless you’ve lived in Iowa for less than two years.

Chapter 13 bankruptcy allows debtors to catch up on their debts, such as car and mortgage payments. It involves creating a three or five-year repayment plan that your creditors have to approve. You may keep your assets if you stay current with your monthly payment plan. However, missing a payment can result in losing your car or home. 

Your secured and unsecured and secured debts combined have to be less than $2,750,000 to be eligible for Chapter 13.

What Is the Income Limit for Chapter 7 Bankruptcy in Iowa?

To be eligible to file under Chapter 7 bankruptcy, the debtor has to pass a means test. First, the test compares the debtor’s average monthly household income to the state’s median income of households of the same size.

For cases filed on or after May 15, 2023, the annual median income limit is $60,971 for one earner. If the debtor’s income is less, they will pass the means test. If it’s not, the debtor must undergo the second part of the means test. In this part, the debtor’s disposable income for the last five years will be calculated and compared to their debts. If their five-year disposable income is enough to repay their unsecured debt, they may not qualify.

Debtors who do not qualify for Chapter 7 may be referred to Chapter 13 bankruptcy.

Navigating the 2005 Bankruptcy Act: A Closer Look

The 2005 Bankruptcy Act introduced stringent requirements for debtors, aiming to ensure that those who can afford to pay their debts do so. Central to this legislation is the means test, a tool designed to differentiate between those who can feasibly repay their debts under a restructured plan and those who cannot. If your income surpasses the median for households of your size in Iowa, the means test scrutinizes your disposable income to determine eligibility for Chapter 7 bankruptcy. This test ensures that Chapter 7 is reserved for individuals genuinely in need of its relief.

Moreover, the Act mandates detailed documentation, including but not limited to tax returns, proof of income, and comprehensive lists of liabilities and assets. This paperwork is crucial, as it provides the court with a clear picture of your financial situation. Failure to accurately complete and submit these documents can lead to case dismissal. Therefore, understanding and complying with these requirements is essential for a successful bankruptcy filing.

Understanding Bankruptcy Qualification Criteria

Qualifying for Chapter 7 or Chapter 13 bankruptcy in Iowa hinges on specific criteria, tailored to ensure the process aligns with an individual’s financial situation. For Chapter 7, the means test is pivotal. It assesses your income against Iowa’s median for similar households. If your income falls below the median, you’re in. If not, your disposable income over the next five years will be scrutinized to determine if you can repay a portion of your unsecured debts. This path is best for those with limited income and assets.

Chapter 13, conversely, is designed for individuals with a regular income stream, allowing them to reorganize their debts. The total debt limit for eligibility is capped at $2,750,000, including both secured and unsecured debts. This option facilitates a repayment plan over three to five years, potentially retaining your assets. It’s a structured path to solvency, requiring a steady income to maintain the agreed-upon payment plan.

Both routes offer a beacon of hope, yet demand a thorough understanding of the eligibility requirements to navigate towards financial recovery effectively.

Need a Bankruptcy Attorney? Henkels & Baker, PC, Are Here for You

Sometimes, people are reluctant to file for bankruptcy due to the complexity of the process. However, debtors don’t have and should not go through bankruptcy alone. A qualified bankruptcy lawyer can make the process easier and more accessible.

Attorneys at Henkels & Baker, PC, have over 50 years of experience helping people regain control over their finances. We can help you too. Contact us today to schedule a free consultation.

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