What Assets Can I Keep if I File Bankruptcy?
What assets can I keep if I file bankruptcy? Consult Henkels & Baker PC for clear guidance and protect what matters most to you. Schedule a consultation today.
Exempt Assets From Liquidation in Chapter 7 Bankruptcy
When you are considering filing bankruptcy under Chapter 7, it is understandable to worry about your property and whether you can protect any assets. Filing for Chapter 7 bankruptcy means that most of your bankruptcy estate will be liquidated by the trustee to repay your unsecured creditors.
However, this does not necessarily mean you will lose everything you own. The purpose of a Chapter 7 bankruptcy filing is to give you a fresh, debt-free start, which is why you are allowed by law to exempt some assets from liquidation.
The U.S. Bankruptcy Code lists several federal bankruptcy exemptions. However, individual states are allowed to opt out of the federal exemptions and set their own state exemptions. Iowa is one such state.
Some states allow their residents to choose or combine state and federal bankruptcy exemptions. However, Iowa residents can only use state exemptions.
Iowa’s Bankruptcy Exemptions
Bankruptcy falls under federal jurisdiction. Therefore, the filing process in Iowa is similar to other states since it ultimately refers back to the federal bankruptcy code.
However, Iowa’s bankruptcy laws determine what property you can keep after filing for liquidation bankruptcy. These exemptions enable you to maintain a basic standard of living during and after the bankruptcy process.
Understanding Exemption Limits
Under Iowa’s exemption laws, limits are set on the value of many exempt properties. It is important to note that these limits refer to your interest or equity in the property and not the property’s market value. A property’s equity is the difference between its market value and any outstanding debts secured by the property. For example, if you own a car worth $12,000 but owe $6,000 on it, the equity in the car is $6,000.
If the property’s equity is more than the exemption amount allowed, the bankruptcy trustee can sell it. However, the trustee will be required to give you part of the sale proceeds equal to the exempt amount. For instance, the Iowa vehicle exemption limit is $7,000. If you have only $6,000 of equity in your car, it is exempt from liquidation. However, if you have $10,000 of equity in your car, the trustee can sell it, give you $7,000 from the proceeds, and use the difference to pay creditors.
For married couples considering bankruptcy, Iowa law offers unique provisions. When filing jointly, spouses can double the exemption amounts for many assets, providing enhanced protection for shared property.
Exempt Assets Under Iowa State Law
Your primary residence is an exempt property under Iowa’s bankruptcy provisions, regardless of its value. This makes it one of the most generous homestead exemption provisions in the U.S. However, there are limitations. Exempt homesteads may not exceed one-half acre in a city or town or 40 acres elsewhere (Iowa Code § 561.1).
You can protect up to $7,000 of equity in a motor vehicle (Iowa Code § 627.6(9)).
You can protect up to $7,000 in clothing, furniture, musical instruments, and other household goods; $2,000 in jewelry; $1,000 in private libraries, family bibles, portraits, and paintings; $1,000 in cash on hand, bank deposits, and other deposits (Iowa Code §§ 627.6(3) & (5)).
The law allows you to protect tax-exempt retirement accounts like 401(k)s, 403(b)s, profit-sharing, and money purchase plans (Iowa Code § 627.6(7)).
You can protect up to $1,000 in accrued wages and state and federal tax refunds up to the date you filed for bankruptcy (Iowa Code § 627.6(10)).
Health and Disability Insurance
Any benefit paid to you under an accident, health, or disability insurance policy is exempt from bankruptcy. In the event of an insured debtor’s death, up to $15,000 of insurance benefits are exempt for the benefit of a spouse, child, or dependent (Iowa Code § 627.6(6)).
Any earned public assistance is 100% exempt. This includes Social Security benefits, disability benefits, unemployment compensation, or other public assistance benefits. It also includes income and child tax credits (Iowa Code § 627.6(8)).
Iowa Wildcard Exemptions
Iowa’s wildcard exemptions allow you to protect up to $1,000 in any personal property (including cash), whether otherwise exempt or nonexempt property under the law (Iowa Code § 627.6(14)).
A comprehensive list of bankruptcy exemptions can be found in the Iowa code. Consulting an attorney for clarification of the exemption rules can help you better understand how the law affects you. An experienced bankruptcy attorney not only understands bankruptcy law and what qualifies as exempt or nonexempt assets but also how those exemptions apply to your bankruptcy case.
Common Bankruptcy Questions and Concerns
As you consider bankruptcy, you may have questions about bankruptcy’s impact on your credit score or the filing process. Understanding how bankruptcy will affect your finances as well as the legal process is crucial for your case’s success.
While bankruptcy does impact your credit score, it also offers a chance for a fresh financial start. With responsible financial management, you can rebuild your credit score over time.
Filing for Chapter 7 bankruptcy involves several steps, from gathering financial information, being assigned a bankruptcy trustee, and attending meetings with creditors. Having a bankruptcy lawyer from Henkels & Baker, PC, by your side can simplify this process. We use our decades-long experience in handling bankruptcy cases in Iowa to help you obtain the most favorable outcomes.
Let Henkels & Baker, PC, Help You Today!
Navigating the complex landscape of bankruptcy requires the help of seasoned professionals. At Henkels & Baker, PC, our experienced bankruptcy lawyers have the knowledge and skills to help you understand federal bankruptcy laws and Iowa’s bankruptcy exemptions.
Our attorneys can assess your unique financial situation, explain the exemptions applicable to you, and guide you through the filing process. We understand the challenges you may be facing, and we are here to provide the support you need to protect your assets and secure your financial future.
Talk to an attorney at Henkels & Baker, PC, today for comprehensive assistance with bankruptcy in Iowa. Take the first steps to your financial freedom and well-being.
Dustin was Excellent – professional, thoughtful, empathetic. Would definitely refer him to others.
The care and knowledge I received before and during my bankruptcy with your firm was 100% helpful.