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Jeff Mathias, Iowa Bankruptcy Attorney 4800 Mills Civic Parkway, Suite 218
West Des Moines, Iowa 50265
Tel. 515-261-7526
Toll Free 1-800-997-1395 jeff.mathias@gmail.com

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Iowa Bankruptcy Guide:
Chapter I - Iowa Bankruptcy Basics

A. What is Bankruptcy?

Bankruptcy is a way for Iowan's in financial distress to legally discharge unmanageable debt and get a fresh financial start. Courts consider bankruptcy the responsible approach if we have debt we can't handle. Otherwise, we may continue to acquire new debt that we can not pay. Your right to bankruptcy relief is in the United States Constitution. The bankruptcy code is a Federal Law and bankruptcy cases are filed in Federal Court and not state court. But we do apply Iowa law too, especially when it comes to exemptions, the assets you get to keep.

In Chapter 7 bankruptcy, theoretically your property is "liquidated", but since your home, car(s), furniture, appliances, employer sponsored retirement plans and most other personal property are exempt, most people do not lose any property when filing Chapter 7 here in Iowa, see Iowa Exemptions. The most common non exempt asset is tax refunds if you are filing your case between about October and when the refunds are received early the next year. The rest of the year, we don't need to worry about refunds. We can claim $1,000/$2,000 joint exempt plus use part of your wild card, but sometimes it is better to wait until they are received and spent according to Jeff's instructions if you are filing after about October 1st. Also, payments to family made within 1 year of filing your bankruptcy can be recovered from the family member, so avoid repaying money to family if you are about to file bankruptcy (preference payments). If you have questions about whether your assets will be exempt, Email Jeff for feedback.

With Chapter 7, you discharge credit card, medical and most other consumer debt, but not child support, student loans, criminal fines and penalties or most back taxes. You can discharge judgments. Your spouse is not required to file, although most do if they are on the debt too.

Chapter 13 Bankruptcy is primarily for people with income too high to qualify for Chapter 7. Others file Chapter 13 to include past due house payments in their 5 year repayment. Unless you have a specific reason for a Chapter 13, you are normally better to file a complete discharge under Chapter 7. The failure rate on Chapter 13 is over 50%, because allowable expenses are very low. Some people end up converting their Chapter 13 to a Chapter 7.

There is also a Chapter 11 bankruptcy, used to reorganize a business and Chapter 12 bankruptcy for farmers & fisherman, although farmers often file under Chapter 7 or Chapter 13.

Timeline - About 3 1/2 Months Total

The entire Iowa Chapter 7 process takes about 3 1/2 months and results in a discharge of your debt.

Credit Counseling First - Meet with Jeff - Hearing in about 30 Days
Discharge in about 9 1/2 Weeks after Hearing

Bankruptcy is filed in Federal Court - our Des Moines Judges have jurisdiction over all 99 Iowa Counties

All bankruptcy cases are filed in Federal Court. Each of our two Iowa Federal Courts (Northern District of Iowa and Southern District of Iowa) have jurisdiction over the entire state, so you can file here in Des Moines from anywhere in Iowa. About 10,000 Iowan's get bankruptcy relief each year.

Credit after Iowa Bankruptcy

Bankruptcy stays on your credit for 10 years, but many people purchase a home with a good interest rate 2 years after Iowa bankruptcy.

Bankruptcy Court website.

B. Overview of a Typical Iowa Bankruptcy

Since 2005, eligibility has been based on income. If you are under median income, you are eligible, period. If you are over median income, you may be eligible.

1. Credit Counseling. If you are under median income - Jeff recommends www.ypside.com

Bankruptcy Credit Counseling- Iowa Providers

2. Meet with Attorney

Your attorney will discuss your income and expense and home and cars with you and how to exempt them. Preference payments, business issues, pending claims against others, and in the fall and winter, anticipated tax returns will normally be discussed. If you are filing your bankruptcy with a big tax refund pending, be sure to discuss how much you can keep with your attorney.

The attorney will normally discuss the "red flag" issues like recent credit card cash advances or balance transfers, other recent debt and payments to family.

Pre-Bankruptcy Planning

How to go about protecting your assets
How to handle any non exempt assets
Timing of filing with respect to bank balance, tax refunds or other issues

3. Drafting of the Petition

The petition is the document that will list all of your assets, debts, income and other information the Court may consider in granting a discharge. Some attorneys draft the petition from a packet that you have filled out; Jeff draft's one on one with you so that no packet is required. You can prepare early with Jeff via email to get much of your petition done before the office meeting.

You can also purchase software online to draft your own petition for filing "pro se". It is common for a pro se debtor to file a defective petition resulting in the loss of assets the debtor would have kept if they had been represented by an attorney who knows the "rules of the road" for a successful bankruptcy filing including pre filing planning, how to apply Iowa Exemptions and the practical aspect of asset liquidation.

4. Review & Filing

Most attorneys have the client return to the office to review the draft petition before filing. Jeff does all of this during the one appointment. Your attorney will file your petition and you will receive a notice of your hearing date and time from the Clerk by U.S. Mail within a few days of filing. Once your case is filed, you can take a 2nd online course that is required. After filing, the Trustee will want copies of your bank statements and paystubs from work that include the day of filing. Jeff will email you at the appropriate time. Be sure to promptly and fully comply with these requests since your case could be dismissed for a simple failure to cooperate even though the documents would otherwise be fine if provided.

5. Bankruptcy Hearing - About 30 Days after Filing

This meeting of Creditors is required by the Bankruptcy Code, and provides your creditors an opportunity to ask you questions about your assets. The trustee will verify the contents of your petition. Your attorney will attend your hearing and address issues that may arise. All of Jeff's hearings are in Des Moines. Des Moines bankruptcy hearaings are scheduled Monday-Friday on the hour. You will normally be done within an hour.

6. Discharge- About 9 1/2 weeks after Hearing

Discharge normally occurs about nine weeks after the hearing. As a practical matter most cases are over when the discharge is issued, but you still need to cooperate with trustee requests like providing your tax returns if you are filing late in the year. You should save a copy of your discharge in your permanent file since you may occasionally need it in the future.

7. New Credit after Iowa Bankruptcy

Once discharged, your case will normally remain on your credit report for 10 years. However, many debtors are offered credit right away and many purchase homes within two years of filing. The most important thing is to have stable employment and income, save a reasonable down payment and avoid taking on new credit card, furniture or other debt that would impair your debt to income ration. See New Credit after Bankruptcy.

C. History and Philosophy of Bankruptcy

Many clients struggle with the emotional aspects of filing bankruptcy. It may help to review some of the historical underpinnings and philosophy of modern bankruptcy law.

Prior to modern bankruptcy law, if a merchant in Italy could not pay his debts, his creditors would break his work bench, so that he could not continue his trade. They would take whatever assets he had and leave him destitute. From "break the bench" arose the word "bankrupt".

However, there is a theological basis for a more humane approach to heavy debt:

"At the end of every seven years you must cancel debts. This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the LORD's time for canceling debts has been proclaimed." - The Year for Canceling Debts, Deuteronomy 15

This "seven year" rule may be the basis for the modern American rule requiring consumers wait seven years between Chapter 7 filings changed to 8 years in the 2005 Bankruptcy Abuse and Consumer Protection Act.

In modern day America, bankruptcy is considered an important way to encourage risk taking. If entrepreneurs could not fall back on bankruptcy they would be much less likely to start businesses and develop new ideas and products. One of the biggest differences between America and Europe is that we have a "right to fail" here. In fact, we almost celebrate failure and redemption.

Modern bankruptcy is a last resort when we can no longer pay our debts. We would all much prefer to pay in full if we could. Many people to great lengths to try and satisfy their creditors including taking out second mortgages and cashing out retirement plans, neither of which are a good idea by the way.

Unfortunately, the other alternative to bankruptcy for most clients is to simply continue to acquire debt they will never be able to repay. That is why our courts consider bankruptcy the responsible approach to unmanageable debt. It is much better to "draw a line in the sand" and realize that you are simply digging yourself a deeper hole than to continue to acquire debt you will never be able to repay. If you view your bankruptcy as an economic and not an emotional decision, as a financial planning tool, you will feel better about going forward.

Also, realize you are not the first to struggle with debt:

Abraham Lincoln's Illinois general store failed. After winning a spot in the State Legislature, Abe noticed his horse and saddle were gone. They were repossessed by the Sheriff! Later, he confided to a friend that debt was his life's greatest obstacle. Honest Abe also practiced Bankruptcy Law in Illinois before moving on to hold the United States together as President during the Civil War.

Des Moines, Iowa bankruptcy attorney Jeff Mathias handles Chapter 7 Bankruptcy, All Iowa Counties.

Check Jeff's Chapter 7 Videos and YouTube Channel.

Jeff Mathias
Iowa Bankruptcy Attorney
Statewide Practice, All 99 Iowa Counties

4800 Mills Civic Parkway, Suite 218
West Des Moines, Iowa 50265
Tel. 515-261-7526
Toll Free 1-800-997-1395
jeff.mathias@gmail.com