Each bankruptcy district has local rules, procedures, and local bankruptcy forms that they use.
Filing for bankruptcy is a major decision that many people consider when faced with financial difficulties. Chapter 13 bankruptcy in Iowa can help you get out of debt and get back on your feet after a financial crisis. One of the most important things about an Iowa Chapter 13 bankruptcy is understanding if you can afford the Chapter 13 plan payment.
With a Chapter 13 bankruptcy filing, you can catch up on mortgage payments, keep your car, and get rid of debts you can’t pay. Let’s find out what we’re going to cover:
- Chapter 7 vs Chapter 13 Bankruptcy in Iowa
- Calculating Chapter 13 Plan Payments in Iowa
- Iowa Resource Test
- Iowa Credit Counseling and Debtor Education Course
- Iowa Bankruptcy Exemptions
- Iowa Bankruptcy Courts and Trustees
- Alternatives to Filing for Bankruptcy in Iowa
Comparison of Chapter 7 to Chapter 13 Bankruptcy in Iowa
Filing for Chapter 7 bankruptcy can get you out of debt in four to six months. However, you may risk losing Chapter 7 property if you own property with substantial net equity relative to the bankruptcy exemption.
Also, some Chapter 7 bankruptcies filed in Iowa may not result in loss of property. Either way, you’ll want to thoroughly study the Chapter 7 bankruptcy process before filing for Chapter 7 bankruptcy. On the other hand, debtors who file under Chapter 13 can keep all of their goods. If they have a net asset value above the allowed bankruptcy exemptions, they can pay a little more each month to keep those assets.
Chapter 13 bankruptcy in Iowa has several advantages that Chapter 7 cases do not. For example, you can stop repossessions and foreclosures by filing Chapter 13. While a Chapter 7 case stops these processes, you don’t have very long to catch up on outstanding payments to keep the property. In a Chapter 13 case, you can take up to five years to catch up on your mortgage payments, if necessary. You may also be able to extend your car loan and reduce the interest rate in a Chapter 13 case.
The Chapter 13 process allows you to restructure your debts into an affordable monthly plan. In many cases, you pay a small percentage to get rid of unsecured debt, including credit card debt, medical bills, old utility bills, personal loans, court debts, and some old tax debts. . Many debtors are debt free except for their mortgage payments when they complete a Chapter 13 bankruptcy in Iowa.
Calculating Chapter 13 Plan Payments in Iowa
For example, the amount of your Chapter 13 bankruptcy payment is based on a variety of factors. Factors that may affect your plan payout include your disposable income, non-exempt equity, debt, and recent financial transactions. We explain how to calculate your disposable income and non-exempt equity in assets in the following sections.
Priority unsecured debts must be paid in full through a Chapter 13 plan. When calculating your Chapter 13 plan, you must pay most tax debts, repay child support and alimony. for husband in its entirety. You must also pay all administrative costs under the bankruptcy plan.
General unsecured creditors receive a percentage of their debts through the Chapter 13 plan. When you complete your Chapter 13 cases, all remaining amounts owed to general unsecured creditors, except for student loans, are released (forgiven). Unsecured debts that are generally eligible for Chapter 13 discharge include, but are not limited to:
- Medical expenses and debts
- Credit card debt
- Personal loans
- Old utility bills
- Most trial privileges
- Personal loans
- Old rent or lease payments
If you are experiencing other hardships such as unemployment in Iowa, you can use an Iowa unemployment calculator to estimate your benefit amount.
Iowa Resource Test
The means test is a common topic in Chapter 7 cases, as it is the bankruptcy form used to determine whether a debtor meets the income requirements for a Chapter 7 bankruptcy discharge. However, the test Iowa’s Chapter 13 resource base is also significant. The results of the resource test may impact the length of your Chapter 13 case and the payment of your Chapter 13 plan.
Calculation of current monthly income
The first part of the means test calculates your current monthly income. The current monthly income is used to calculate the annual median income. Currently, monthly income is based on your household income over the past six months. Add income from all sources and divide by six to calculate your average monthly income. If your spouse does not file, but contributes to the household income, you must include your spouse’s income in your figures.
Median income is calculated by multiplying your current monthly income by 12. Compare your median income to the median income of a household of the same size in Iowa. If your median income is above the state median income, you must file a 60-month Chapter 13 plan.
Median income levels in Iowa are adjusted every few months based on data from the Census Bureau and the IRS.
Calculating Disposable Income for a Chapter 13 Plan
Disposable income is calculated in the second section of the means test. Deduct eligible expenses from your current monthly income to calculate disposable income. Certain living expenses are limited, such as deductions for food, clothing, household supplies, travel, and personal care items. You can view a list of standard living expenses on the United States Trustee’s Office website. Additionally, you can deduct expenses related to mortgage/rent payments, child care expenses, certain charitable donations, car loan payments, alimony, child support, and bonuses. life insurance.
Your disposable income is included in your Chapter 13 plan. Therefore, it is important to take all allowable deductions to minimize disposable income.
Also, it is important to understand the cost of bankruptcy in Iowa. The cost is $313 for a Chapter 13 bankruptcy, but does not include attorney fees. So a bankruptcy attorney in Des Moines may charge a different chapter 7 fee than another city, but the chapter 13 attorney fee may meet a no-look fee, which is the reasonable cost to cover a specific service.
Iowa Credit Counseling and Debtor Education Course
Before filing for Chapter 13 bankruptcy in Iowa, you must complete a credit counseling course. After you file your case under Chapter 13, you must complete a debtor education course.
Both bankruptcy courses are available online for a nominal fee. However, you must use a company approved by the United States Trustee’s Office. A list of licensed credit counseling and debtor education companies for Iowa is listed on the UST website.
Iowa Bankruptcy Exemptions
Debtors are allowed to retain certain assets when filing for receivership. Bankruptcy exemptions protect a certain amount of equity in specific assets. The federal bankruptcy exemptions are found in 11 USC §562.
However, Iowa opted out of federal bankruptcy exemptions. If you lived in Iowa for at least 730 days before filing for Chapter 13 bankruptcy in Iowa, you must use the Iowa bankruptcy exemptions. If you did not reside in Iowa for two years before filing bankruptcy, you may be able to claim federal bankruptcy exemptions. The exemptions that apply in your case depend on your state of residence for most of the 180 days before the 730-day residency requirement to use Iowa bankruptcy exemptions.
Understanding Bankruptcy Exemptions
Fortunately, Iowa has a generous homestead exemption. While federal exemptions limit the amount of equity in a home, Iowa’s homestead exemption is unlimited, provided you meet property restrictions. Additionally, you must have resided in Iowa at least 40 months to qualify for the unlimited homestead exemption. Otherwise, your homestead exemption is limited to $160,375 by federal law.
Other Iowa bankruptcy exemptions are limited, but protect a certain amount of equity in a variety of properties, such as clothing, vehicles, household goods, retirement benefits, and other personal property.
How do bankruptcy exemptions affect my Chapter 13 plan payments?
If you have equity in property that is not covered by exemptions, your Chapter 13 plan payment may increase. To calculate net equity, subtract all valid liens and allowed bankruptcy exemption from the fair market value of the property. If the result is greater than zero, your plan payment may need to be higher to retain ownership.
Iowa Bankruptcy Courts and Trustees
Iowa is divided into two districts for bankruptcy cases. The Northern District of Iowa has bankruptcy courts located in Cedar Rapids and Sioux City. However, there are several courtroom locations in northern Iowa for convenience. The Southern District of Iowa has a bankruptcy court located in Des Moines. However, there are several courtroom locations in southern Iowa for your convenience.
Each bankruptcy district has local rules, procedures, and local bankruptcy forms that they use. Before filing for Chapter 13 bankruptcy in Iowa, you should review information about your bankruptcy district, especially if you choose to file for bankruptcy without an attorney.
Chapter 13 trustees are assigned to cases based on the district. A Chapter 13 trustee is responsible for administering the bankruptcy estate, including receiving payments, reviewing claims, and paying creditors.
When considering Chapter 7 vs. Chapter 13 bankruptcy, understand the costs, alternatives, and pros and cons. Hopefully this article will help you make the most informed decision regarding Chapter 13 bankruptcy in Iowa.