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Contact UsDoes a Chapter 7 bankruptcy remove all of my debts?
Does a Chapter 13 bankruptcy remove all of my debts?
Is there any way to eliminate student loans through bankruptcy?
Can I eliminate child support or alimony by declaring bankruptcy?
If I file bankruptcy, will I lose my home?
What property am I required to give up?
What alternatives do I have to bankruptcy?
How long will my bankruptcy show up on my credit report?
Should I hire an attorney to assist during my bankruptcy proceedings?
“Does a Chapter 7 bankruptcy remove all of my debts?”
A Chapter 7 bankruptcy will not cover any debts not listed at the time of filing. It also does not eliminate the following:
- Recent federal, state and local income taxes
- Child or spousal support
- Court fees, fines, penalties, or restitution
- Debts arising from an OWI conviction
- Debts caused by the debtor’s fraud during a previous bankruptcy
- Debts incurred when the debtor was fraudulent as a fiduciary.
Creditors can object to prevent discharge (forgiveness) of the debts. To be successful in blocking a discharge of debts the objecting creditors must meet the tests set forth in the bankruptcy code.
“Does a Chapter 13 bankruptcy remove all of my debts?”
Chapter 13 bankruptcies also do not discharge the following:
- Student loans
- Debts arising from an OWI conviction
- Court fees, fines, penalties, or restitution
- Child or spousal support
Long-term debts covering a period beyond the end of the term are not modified in a Chapter 13 bankruptcy including mortgages, loans on vehicles.
Other debts not discharged in a Chapter 13 bankruptcy include debts for which a discharge was denied in a prior bankruptcy; debts incurred by fraud, and tax-related debt such as delinquent taxes or penalties for tax evasion.
“Is there any way to eliminate student loans through bankruptcy?”
The court can rule that settling the loan would impose severe hardships on the debtor. To meet this requirement, the debtor must show the court that a good-faith effort was made to repay the student loan, and that the debtor will be unable to maintain a minimum standard of living while repaying the loan. It is generally very difficult to obtain the discharge of student loans in any bankruptcy.
“Can I eliminate child support or alimony by declaring bankruptcy?”
Child support and alimony are not dischargeable in any bankruptcy. These are known as domestic support obligations. Domestic support obligations can also include debts that one spouse is ordered to pay to third party creditors after a bankruptcy.
“If I file bankruptcy, will I lose my home?”
If you are current on your mortgage payments you will generally be allowed to keep your home in Iowa. However, many states are not as generous as Iowa with its unlimited homestead exemption. In these states a bankruptcy trustee can force the sale of a homestead that is not fully exempt, pay the debtor the value of the exemption, repay secured creditors and then utilize the equity to pay the debtor’s unsecured creditors.
“What property am I required to give up?”
There are several categories of income and property exempt from bankruptcy. If you file a bankruptcy and have property that is not exempt, the bankruptcy trustee will sell your non-exempt property and use the proceeds to pay your creditors. Some examples of exempt property include:
- Retirement Plans
- Cash value of life insurance up to certain limits ($10,000 contributed within 2 years of filing – unlimited cash value of life insurance in Iowa provided the cash was contributed to the policy more than 2 years before filing
- Vehicles, to a value limit ($7,000 equity in one vehicle in Iowa)
- Reasonably necessary property, such as furniture, clothing, and appliances ($7,000 in Iowa)
- Tools necessary to the debtor’s profession, to a value limit ($10,000 in Iowa)
- Jewelry, to a value limit
- Home equity, which varies by state (Unlimited in Iowa provided no pre-acquisition debt exists)
- Benefit payments, such as welfare, Social Security, and unemployment payments
- Damages awarded by a court for personal injury
- Wildcard exemption ($1,000 in any property in Iowa)
Each person’s situation is unique. In order to determine what property you will be entitled to keep in a bankruptcy you should contact a bankruptcy professional to evaluate your individual situation and advise you.
“What alternatives do I have to bankruptcy?”
You should determine whether your financial difficulties are temporary. You can ask your creditors to adjust your payments or payment schedule. Creditors may agree to this if you have been prompt in the past, or simply to avoid a costly and inconvenient bankruptcy proceeding. If you seek the help of a credit counselor, do research on the organization first. Some advisors work for non-profit agencies, but others charge fees and can offer unscrupulous or simply wrong advice.
“How long will my bankruptcy show up on my credit report?”
Chapter 7 and Chapter 13 bankruptcies will appear on your credit report for ten years from the date the bankruptcy is filed. One agency removes Chapter 13 information after seven years, but this is not a requirement.
“Should I hire an attorney to assist during my bankruptcy proceedings?”
An attorney with experience in bankruptcy law can help you whether you are a debtor or a creditor. Keep in mind that the new bankruptcy law of 2005 is very complicated. If you are a debtor, an attorney can help to speed the process and protect your interests by ensuring that you maximize your exemptions and fully disclose your situation to the court. If you are a creditor, an attorney can help you recover your debts and make sure that the debtor is not retaining assets it should not be entitled to retain.