Iowa Bankruptcy Guide

Chapter VI - Common Bankruptcy Mistakes

Filing Iowa Bankruptcy when you have a large tax refund pending.
Giving money to family before filing.
Giving away property before filing.
Failing to disclose all assets, lawsuits and claims against others or other facts.
Having more than $100 per person in your bank account ($200 for couples filing together) on the day you file Iowa Bankruptcy.
Failing to list all your creditors including any liens on real estate.
Failing to communicate with attorney or attend the hearing.
Failing to attend your hearing.
Failing to comply with the "gotcha" rules in the new bankruptcy law.

Congratulations for taking the time to learn more about Iowa Bankruptcy! As a practicing bankruptcy attorney I am thrilled every time a client comes to me from my website because I know that client is going to be better prepared. Because you have done your homework you will have a much better understanding of the process. You will ask better questions and reduce the chances of a problem coming up on your case. Taking a more active role in your case can only be good for all involved!

With this in mind, following are some issues that you should think about and discuss with your attorney if are you consider filing Iowa Bankruptcy. Many of these can be managed with the assistance of an experienced bankruptcy attorney.

Filing Iowa Bankruptcy when you have a large tax refund pending. The rules on what portion of your pending tax refund you can keep seem to get more complex each year, but the general rule is this: You keep $1,000 per person if that person worked the entire year for which the return is calculated. In addition, you would keep all of your Earned Income Tax Credit (not to be confused with the Child Tax Credit). Beyond that there are some issues having to do with how much you worked the prior year that can affect how much you keep. However, if you wait until you have received and spent your refund before filing, and you spend it correctly, you do not lose any of your refund. The risk of making a preference payment or purchasing an asset that cannot be exempted make it a good idea to consult with your attorney before spending your refund. It is not unusual for the trustees to take back preference payments or seek denial of discharge for those who make them.

Giving money to family before filing. Under the bankruptcy Code, if you give or repay money to family within one year of filing the Court has the power to take that money back and distribute it to all your creditors. Congress views these “preference payments” to be unfair to other creditors. If the family member does not “cough up” the money for the trustee, the trustee can move for denial of your discharge due to the unfairness to your other creditors.

Giving away property before filing. It is also considered unfair to your creditors if you give valuable property away in anticipation of filing bankruptcy. Such gifts can also be taken back, sold and the funds given out to creditors.

Failing to disclose all assets, lawsuits and claims against others or other facts. In most cases your bankruptcy attorney can help you do some legal pre-bankruptcy planning that will keep you from having to turn money or assets over to the trustee. But your attorney can not do this if you have not told them about the asset. Increasingly, we are also seeing criminal prosecution for debtors who commit fraud by omitting assets or perjury at the hearing. If you have omitted anything, you should correct it orally at the hearing.

Having more than $100 per person in your bank account ($200 for couples filing together) on the day you file Iowa Bankruptcy. A recent client filed her bankruptcy 20 days after making her last rent payment by personal check. She assumed the landlord had deposited the check and it had cleared. Unfortunately, they had not and the money was still in her account on the day of filing. She had to turn that money over to the trustee and was not a happy client. So you may want to go to your bank the day before filing or check online and make sure your balance is down. It seems crazy to only let debtors have $100 on the day of filing, but that part of the law was written when $100 was a lot of money and unfortunately has never been updated. Your attorney can tell you how to spend excess cash without getting into trouble.

Failing to list all your creditors including any liens on real estate. The bankruptcy Code seeks fairness for all parties. A basic requirement of fairness is to give everyone notice of your filing. That way if a particular creditor wants to object to your discharge (a rarity) they can. But if they have not been notified of your filing, they lose that option. So you do need to list all your bills. If you do not list a bill, the creditor may come back after you later asserting that they never had notice. We even have had creditors come back after our clients for debt the creditor had previously reported as “charged off”. We have even had creditors tell a debtor their account is paid in full. So the client does not list the creditor and finds out later they did have a balance. So if you even suspect you owe money you should list the creditor and an estimated balance just in case.

Your attorney can avoid liens on your home if he knows about them. If you have been sued and think a lien may have been placed on your home you should check at the County Courthouse and find out. If so, you need to provide a copy of the lien to your attorney so it can be avoided. Many clients do not have a complete list of creditors. Equifax seems to be the best resource for a quick online credit report. Beyond that you will just have to do the best detective work you can, searching all your old files for bills. Not all creditors report, so not all your bills will be on your credit report. If you have collection agencies on some of your accounts, you should list both the original creditor and the collection agency on your petition. This will decrease the likelihood of your continuing to get bills.

Failing to communicate with attorney or attend the hearing. Regardless of how you go about it, lets face it, filing bankruptcy is not much fun. And it is human nature to avoid unpleasantness. Some people avoid bankruptcy to the point of having their wages garnished, their home taken away, their car repossessed, human nature. But once you start your case, if your attorney cannot get in touch with you or you do not come to the hearing, you can have real problems, including dismissal of your case.

Failing to attend your hearing. If you do not attend your hearing your case may be dismissed and you may be found in contempt and ordered to appear before the Judge and explain your absence.

Failing to comply with the "gotcha" rules in the new bankruptcy law. If you fail to complete and file a credit counseling certificate, a financial planning certificate or fail to provide documents like tax returns, bank and wage statements at the correct times your bankruptcy may be automatically dismissed. Your experienced bankruptcy attorney can guide you through this minefield toward a successful discharge.