Common Questions About Bankruptcy in Iowa

Can I keep my house and car?

Often, you will be able to keep both your house and car. Generally, to do this you should continue to make your regular mortgage or loan payments. If a lender insists that a debtor sign a reaffirmation agreement on a vehicle the debtor may be required to attend a hearing before the judge. We'll discuss this in greater detail during our visit.

Does it matter what my income is for filing bankruptcy?

Debtors with primarily consumer debts may not qualify for a Chapter 7 if they earn more than the state median income. Income is based on the gross average income for the past six months but does not include social security or unemployment benefits. Debtors that earn more than the state median income and have significant disposable income after deducting their living expenses might have to file a Chapter 13 bankruptcy. We can discuss this "means test" procedure more after we have received your completed client questionnaire and have a full view of your current financial situation.

What information will I need to provide?

Thompson Law Office uses a detailed questionnaire to get information about income, assets, expenses, and creditors. In addition, you'll need to provide us copies of paystubs or other income statements for the 7 months prior to filing, tax returns for the most recent three tax years, property tax assessments on any real estate, and credit reports. We'll give you a complete list of the required documents, all of which are included in the client packet. For more information on the client questionnaire and packet, please click on our "Getting Started" tab.

I've already filed bankruptcy once. Can I file again?

It depends on how long ago you filed and what type of bankruptcy it was. In general, you cannot file Chapter 7 if you obtained a Chapter 7 discharge more recently than eight years ago. There are different rules if you're filing a Chapter 13. You won't be able to receive a discharge in a Chapter 13 bankruptcy if you received a Chapter 7 discharge within four years or a Chapter 13 discharge within two years. The questionnaire will ask if you have previously filed bankruptcy. Be sure to note that you have previously filed on the questionnaire when you return it to our office so we can discuss your options in further detail.

How long does the process take?

From the time of filing to the receipt of a discharge in a Chapter 7 or confirmation of a Chapter 12 or 13 Plan, the process generally takes about six months. Most of that time nothing much is happening except waiting for time periods to pass. Most debtors are finished actually having to do anything within a month after filing. Please know that bankruptcy filings can not happen overnight. If you are being threatened with judgments and potential garnishments or your home is pending foreclosure DO NOT WAIT! Complete your client questionnaire and get it to our office so we can take necessary actions against these types of situations.

What debt cannot be discharged in the bankruptcy?

In general, debts for student loans, alimony and child support, some back tax obligations, criminal restitution, and debts for death or personal injury caused by operating a vehicle while intoxicated are not dischargeable. There are exceptions though so if you have these types of debts be sure to discuss them with us in your questionnaire.

Isn't it immoral or sinful to file bankruptcy?

No, absolutely not. My religous faith is a key part of my life so the issue of bankruptcy and morality is an important one to me. Obviously, people should repay their debts if they can. But there is clear evidence in the Bible that filing bankruptcy by people who can't find another way out of financial trouble is not only permitted but specifically approved. In Deuteronomy 15:1-2 creditors were instructed by God to grant release from debt to anyone who had borrowed money. There was no concern for whether the lender was legitimately owed the money or whether the borrower had made mistakes. The debt was to be forgiven. Period.

This mandatory debt forgiveness had a two-fold purpose. It showed compassion and mercy to the poor, which is required to honor God, and it led to more economic stability for families and the community. Being weighed down by debt is not a productive way for any family to live and filing bankruptcy to get out from under this burden is neither sinful nor immoral. This is especiallly true when the cause of bankruptcy is almost always something beyond the control of the debtor, such as medical problems or loss of a job. And when creditors now often charge upwards of 30% interest on debt (a rate most people would consider usury) no one should feel guilty for seeking lawful relief from their debts.

If I have to file a Chapter 13 wouldn't it just be better to settle with all my creditors?

It might if you don't have much debt but for most people a Chapter 13 bankruptcy provides much more benefit than using a debt settlement program. With a Chapter 13 you can't be sued by your creditors while you're making payments and the debt is frozen at the time you file since there's no further interest added to the debt. In addition, unless you're able to settle with ALL of your creditors, you will have wasted the money you spent on the few who do settle while you still have to file bankruptcy. Other advantages of Chapter 13 over debt settlement include the avoidance of tax consequences from the forgiven debt; the potential to "cram down" loan values and interest rates on secured loans; the possibility of stripping off second mortgages; and paying tax debts, mortgage defaults and student loans under a structured plan. It might also be possible in a Chapter 13 that if your creditors fail to file a proof of claim that they are forever barred from trying to collect the debt.

What does it cost to file for bankruptcy?

For an uncontested personal Chapter 7 bankruptcy Thompson Law Office charges a flat fee of $1,300. This fee covers all costs incurred with filing the bankruptcy, including the $299 filing fee. It does not include the required credit counseling and financial education course fees but those cost less than $100 if you use the agencies to which I refer clients. If the bankruptcy involves substantial business as well as personal debts, the fee may be higher. While creditor disputes are rare, if any disputes do occur after the bankruptcy is filed clients are billed hourly for those services. There may also be additional costs for filing amendments to the bankruptcy , filing a redemption, and seeking reimbursement of garnished wages. For a Chapter 12 or 13 bankruptcy I charge an hourly rate of $225/hour. A payment of $1,300 is needed to file a Chapter 13 bankruptcy, which includes the $274 filing fee. Additional costs incurred in a Chapter 13 are paid through the plan. A payment of $8000 is needed for a Chapter 12, which includes the $239 filing fee. I am happy to take payments after an initial deposit of $300 but all the fees must be paid in full before the bankruptcy can be filed.

What impact does bankruptcy have on my credit?

It's impossible to say for certain. The only "rule" is that the bankruptcy can remain on your credit report for up to ten years. Beyond that, every creditor will have its own policy about loaning to someone with a previous bankruptcy. Your future ability to obtain credit will depend on the amount of your income, whether you've had any late payments or other credit problems since the bankruptcy, and how long it's been since the bankruptcy was filed. Paying your bills on time and not overextending yourself with too many debt obligations is often the best way to reestablish a good credit record.

Would going to a credit counselor be a good alternative to filing bankruptcy?

Maybe, but credit counseling agencies are very limited in what they can do on behalf of debtors. They do not actually "negotiate" on behalf of debtors but have a preestablished set of standards from the creditors on what will be accepted. For example, the debt management plans offered by credit counseling agencies rarely provide a reduction in minimum monthly payments on credit cards and may even result in a higher payment. The plans usually only reduce the number of years which a debtor has to repay a loan by reducing the interest rate and eliminating late fees. But if you're having difficulty making even the minimum payments, the debt management plans are unlikely to be of much help. For these reasons and others, it's estimated that only 4% of debt managment plans survive the first year of what is usually a 3-5 year period.

What property can I keep?

Bankruptcy law allows debtors to “exempt” certain assets from collection by a creditor. In Iowa, each debtor may exempt the assets listed below (as of July 1, 2006). In certain situations, you may have additional assets that may also be exempt from collection. During our visit, we’ll determine exactly what assets you have that can be protected.

Cash on hand or bank deposits valued at $1000.
Farm equipment or tools of the trade valued at $10,000.
Homestead of one half acre in town or 40 acres in the country.
Whole life insurance cash value of $10,000.
One vehicle with equity of $7,000.
Tax refunds valued at $1000.
Household goods and wearing apparel valued at $7,000.
Many pension and retirement plans.
Public assistance benefits.
Jewelry valued at $2000.

You may be able to retain other property as well by paying its value to the trustee. In most cases debtors lose no property by filing bankruptcy.

Will bankruptcy stop the foreclosure of my home?

Filing for bankruptcy will stop the process of foreclosure on your home. In most cases, once you file your case, an "automatic stay" immediately goes into effect. The automatic stay means that a bankruptcy filing automatically stops most lawsuits, including foreclosures. However, you will still need to do specific things to be able to keep your home, including perhaps choosing to file a Chapter 13 instead of a Chapter 7. If you're facing a foreclosure, DO NOT WAIT. Contact our office immediately to advise us of the situation so we can take appropriate action. You can email Melissa at melissaatthompsonlaw@gmail.com or contact us directly at 515-875-4850.

Will I have to appear before a judge?

Most of the time, a Chapter 7 or 13 bankruptcy does not involve a hearing before the bankruptcy judge. Debtors are only required to attend a meeting of creditors” where the trustee and any creditors present are allowed to ask the debtors questions about their liabilities and assets. Hearings before the judge only occur when there are disputes with creditors or the trustee and even then debtors are rarely required to attend, only their attorney. Debtors may be required to attend a hearing with the judge if they are seeking to reaffirm a debt on personal property.

Will my name appear in the newspaper?

It might, depending on where you live. The Des Moines Register publishes the names of bankruptcy filers living in Polk, Dallas, and Warren counties. Other newspapers may or may not publish this information. It's not something we can control. But remember, thousands of other names will be listed also.