Iowa Chapter 7 Bankruptcy Exemptions in Detail

When you file a Chapter 7, your property goes into the "bankruptcy estate". You get to keep the items you properly exempt. Fortunately we have good exemptions in Iowa so that if we plan well you should be able to keep most or all of your assets and discharge your debt, not a bad deal. Iowa has "opted out" of the federal exemptions. Getting full disclosure of all your assets, doing legal and appropriate pre-bankruptcy planning and exempting your assets is a big part of what your Iowa bankruptcy attorney does for you.  In joint cases, each debtor can claim the exemption so long as they have a property interest.  With cars this means being on the title, with tax refunds this means having had taxes withheld. Iowa bankruptcy exemptions:

Homestead: You can keep your home whether in Des Moines or anywhere else and up to 1/2 acre within city limits or 40 acres outside city limits with no upper limit on value. However, if you acquired your debt before you acquired your home, your exemption may be limited. So be sure to tell Jeff if substantial amounts of your credit card debt occurred before you bought your home.  Be sure to tell Jeff if you are in the process of modifying your mortgage. Some banks are declining modification applications when people file bankruptcy.  Jeff's Iowa bankruptcy exemptions.

Vehicles: You can exempt one vehicle per debtor valued up to $7,000 as long as it is titled in the claimants name. So if a couple has two cars but both are titled in the Husbands name only, there is only one exemption. The amount you need to exempt is the total current market value (See KBB Trade Value) minus current loan balance.. So if your car is paid off you can exempt it up to $7,000 with this exemption. If your car is worth $20,000 and you owe $13,000 you can still exempt the entire car due to the loan balance.

Because they are not worth very much you can often keep old junkers too.

Wages/Social Security Benefits: We can exempt accrued (earned but as yet unpaid) wages and social security benefits.

Workers Comp Claims- Are exempt while in progress. The funds lose their exempt status once received.

Cash/Wild Card: We can exempt your bank balance and cash with your Cash/Wild Card exemption. The $1,000 exemption can also be used for items that you don't have another exemption available for, like excess tax refunds. For this reason, it is usually best to spend down bank balances before we file your case. That leave more wild card exemption available in case something else comes up.

Rental Deposit up to $500.

Tax Refund: Tax Refunds become a bigger issue late in the year after you have worked quite a bit and accumulated a looming refund. So if you file your bankruptcy after you have received your refunds and before about August 1st you are not likely to have any problems keeping all of the refunds. There is a $1,000/$2,000 Joint Married exemption for your pending tax refund. You also get to keep all of your Earned Income Credit (see page 2 of your Federal 1040). Then we can exempt at least some additional amounts with your wild card exemption.

In spending your tax refund, you do need to be aware of preference payments. For example, the Court does not like it when you repay money to a family member for past due debt just before filing bankruptcy. The Judge can take that money back and give it to your other creditors. Far better to repay past due debt to family AFTER you file your bankruptcy.

If you do tend to get very large refunds, go to your employers HR department and ask them to adjust your status to claim all your dependents.  This is much better than turning money over to the bankruptcy trustee because you cannot exempt it later.

Household Goods & Furnishings up to $7,000 in liquidation value. Liquidation = selling on Craigslist, garage sale etc.
If you have Nebraska Furniture Mart debt, discuss this with Jeff.

Jewelry (per debtor):
Engagement Ring- $7,000
Wedding Ring- No limit if purchased at time of wedding
Anniversary Ring- $2,000
Other Jewelry- $2,000

Tools of Trade/Business Assets: Applies to equity value of small business assets unless incorporated. So if the liquidation value of your business assets is $20,000 and you owe $10,000 in debt secured by the assets you can exempt them all. Also applies to tools used in employment and related items. Note there is no exemption for inventory or accounts receivable.

Keeping your Small Business in Iowa Chapter 7 Video

Farm equipment & inventory up to $10,000.

Whole Life insurance cash value is exempt so long as the beneficiary is the spouse or child, although only up to $10,000 if purchased within two years of filing.

Pensions and 401k's are exempt. Bring at least an estimated value so we can claim & exempt it.

Personal Injury proceeds necessary for your support.

Guns: You can exempt one shotgun and one rifle per debtor with no maximum value. There is no exemption for pistols unless you are with law enforcement. But you could use the wild card.

Portraits, libraries & bibles up to $1,000

1 Acre burial plot

Common Non-exempt items: The most common non-exempt assets we see are huge tax refunds. If you get monster tax refunds, you should adjust your dependent claims with your payroll department to increase your regular pay and reduce the refund amount.

Claims against others, so if you have a lawsuit or debt owed to you by someone else, there often is no exemption for that meaning the trustee could take it away from you and collect the funds for the benefit of your creditors. Workers Comp claims in progress are exempt.

Time Shares are not exempt although if they have little or no market value you may be able to keep them, although most people prefer to surrender them and be done with it.

Also toys like motorcycles, trailers, boats, ATV's, snowmobiles and the like. However, if you have a boat worth $2,000 and you owe $2,000 on it you could keep that since it has no equity anyway. We can also use your wild card exemption on these if needed.

Rental Properties: Real estate that you don't live in is not exempt. But again, if your rental property is worth $30,000 and you owe $30,000 there is nothing to exempt anyway.

Jeff can help you with pre-bankruptcy planning on items like this. Although we can exempt most tax refunds, if you have a very large refund coming, be sure to discuss it with Jeff. There is some flexibility on exemptions that is more art than science, like teen cars. Jeff can advise you on assets like this.

Objections- Any party can object to your claim of exemptions, although objections most often come from the standing trustee.  Normally the objection must be filed within 30 days of your examination.  Even invalid claims of exemption stand if not timely objection is filed.

Federal NonBankruptcy Exemptions- Social Security Payments, Veterans Benefits and Civil Service Retirement Benefits.

There are four Bankruptcy Chapters, Chapter 7, Chapter 11, Chapter 12 and Chapter 13

Chapter 7 Bankruptcy - Full Discharge.  Here in Iowa, about 90% of consumers file Chapter 7 bankruptcy, no Repayment.  You get to keep your home, keep your car.  With some reasonable pre bankruptcy planning, most people do not lose any property when they file Chapter 7.  Your spouse is not required to file, you can discharge judgements.  A chapter 7 takes about about 3 1/2 months from office meeting to discharge.  Once your case is filed, calls and garnishments have to stop.  There is no minimum debt amount for Chapter 7.

Chapter 11 Bankruptcy - Reorganization .Chapter 11 is used by businesses with very large assets.  Only about a dozen are filed in Iowa each year.

Chapter 12 Bankruptcy - Farmers Bankruptcy.  Chapter 12 is specifically for Farmers, although farmers often file under Chapter 7 as well.

Chapter 13 BankruptcyRepayment over 5 Years.  Most of the people who don't file Chapter 7, file Chapter 13.  Most chapter 13 cases are filed due to income that is too high for Chapter 7, a Chapter 7 within the last 8 years or to try and save a home by catching up past due payments in the chapter 13 repayment, although some people with income over the Iowa median income do qualify for Chapter 7.

These sections are found in Title 11 of the United States Code- United States Bankruptcy Code.

Iowa Bankruptcy Guide.  Jeff represents people from all Cities and Counties in Iowa from Des Moines.