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A bankruptcy involves consideration of three kinds of debts: priority, secured, and unsecured. Priority debts are the type of things that are usually hard to discharge. These are things such as fines, child support, wages and taxes. Secured debts are those which have collateral involved, such as a car loan or house loan. The application of State and Federal law must be carefully considered to determine the course of action that is available and most protective to the borrower. Finally, there are unsecured debts, which are usually going to be dischargeable. After these debts are considered, the next thing to be considered is the exemptions which may be available. Exemptions belong to individuals, not corporations. They make up the kinds of property that are protected from creditors, unless a person has voluntarily made a pledge of the asset for a loan such as a car or home. These include such things as equity in a vehicle, home equity, household goods, wearing apparel, and retirement plans. The status of these assets may be enhanced prior to bankruptcy filing as a result of the careful planning which takes place.

Can I still file for bankruptcy?

Many people believe that recent changes to the bankruptcy code mean they will no longer be able to file for bankruptcy, or that they can no longer discharge credit card debt, medical bills or other debts. This is usually not true. The changes to the bankruptcy act, enacted in 2005, require means testing to determine if debtors have enough income to repay some of their unsecured debts, such as credit cards, medical bills, cell phone bills or other loans which are not secured by property, such as a car or home loan. However, if your income, based on family size and your location, is under the means test limits, then in most cases you will still be able to use the bankruptcy code to discharge those debts in full. This is called a Chapter 7 bankruptcy. The means test limits for Chapter 7 are approximately the following: 1 person - $36,700, 2 persons - $49,000, 3 persons - $57,500, 4 persons - $67,800, 5 persons, $74,700. Even if your income is above the means test amount, you may still qualify to file under Chapter 7, based on your allowable expenses. This can allow you to file under Chapter 7 if you have high ongoing medical or other necessary expenses and your income is not too much above the means test amount. Even if you are unable to qualify for Chapter 7 relief, consumers can still seek relief under Chapter 13 of the bankruptcy code. If you have too much income to use Chapter 7, then you will be required to file under Chapter 13, which can still provide a great deal of relief for debtors. Chapter 13 can also be the only way to stop a foreclosure action for your home and force the creditor to take a repayment plan for missed payments. The first step is to talk with a knowledgeable bankruptcy attorney to determine what type of relief you will be eligible for, and what chapter is best for your particular situation.

Can I discharge all my debts under Chapter 7?

If you file for relief under Chapter 7 you will usually be able to discharge most, if not all of your outstanding debts. Most debts to credit card companies, collection agencies, utility companies, cable and phone bills are discharged. There are your unsecured debts, because you have not pledged an asset such as a car or home to secure the debt. Secured debts are those debts where a specific asset such as a car or home has been pledged to secure the debt. If you want to keep your car or home you will usually need to continue to pay those debts, although the terms can sometimes be modified, or late payments can be placed at the end of the loan. Certain debts, such as student loans, taxes, criminal fines, child support, judgments resulting from drunken driving, and certain other debts will not be discharged. In addition, in either Chapter 7 or 13, your creditors will not be able to continue to call or harass you. To proceed with lawsuits or garnishments, or even foreclosure actions on home mortgages, they will first need to obtain an order from the bankruptcy court to proceed with those court actions. This can be extremely helpful to give you time to work out an agreement with the creditors to bring home or car loans current, or even move any delinquent payments to the back end of the loan in a Chapter 7 bankruptcy. Your attorney will examine your financial situation to advise you as to what debts will or will not be discharged in a Chapter 7 case.

What is a Chapter 13 bankruptcy?

Chapter 13 bankruptcy requires a debt repayment plan to be proposed to the bankruptcy court for repayment of a portion of your unsecured debts over a period of three to five years. The amount you will pay into the plan is based on your available income, after deducting allowed living expenses and your allowed secured obligations. This can mean that while you will have to pay the creditors something, it can still only be pennies on the dollar. In a Chapter 13 bankruptcy, the secured creditors will be bound by the plan approved by the bankruptcy court. If you are facing foreclosure of your home Chapter 13 can be used to force your lender to accept a plan that will allow you to continue to make your ongoing monthly loan payments, and to pay back the late payments through the three to five-year court-approved plan. You can be required to file under Chapter 13 of the bankruptcy code if your income is too high and you are unable to file under Chapter 7. You can also choose to voluntarily file under Chapter 13, which may be your best option if you are currently facing foreclosure on your home. This option is something you should discuss with a knowledgeable bankruptcy attorney to advise you on which chapter to proceed under and why.

Will I be able to keep my home or my car if I file for bankruptcy?

Many debtors worry that if they file for bankruptcy they will lose their assets, such as cars, homes, furniture, bank accounts, pensions or their other personal possessions. This is usually not true. The bankruptcy code and Iowa law, provide for exemptions, (property that you can keep), as part of the bankruptcy. For most clients these exemptions cover most if not all of their personal property. The following are some of the main exemptions that can be claimed by debtors: $1,000 in cash or bank accounts, $7,000 equity in a car or vehicle, $7,000 in home furnishings and clothing, $2,000 for jewelry plus at least an additional $7,000 for wedding and engagement rings, $10,000 in tools or equipment used for a trade or business and $1,000 in accrued wages and/or tax refunds. In addition, there is also an exemption for the equity in your home, which generally allows you to keep all the equity in your home. Your eligibility for some of the exemptions may depend on how long you have resided in Iowa, or when you acquired your home, and it is important that you discuss your particular situation with your attorney. Creditors still retain their liens against secured property, such as cars and homes with loans against them. You will generally need to pay back those debts if you want to keep your car or home, but you may be able to work with the creditor to move any delinquent payments to the back of the loan, reduce the monthly payments or even make other changes to the terms of the loan. You also will have the option of turning secured property over to the creditor and discharging any debt you owe them, even if the secured property is currently worth much less than what you owe. You may also be able to buy the secured property from the creditor for the current value of the property, and discharge any excess amount. These two options can be very valuable when you owe much more against your car or home than it is currently worth. You will need to discuss these options with your attorney, again based on your own situation.

Will my creditors stop calling me or filing a lawsuit?

When you file for bankruptcy, your creditors all receive notice of the bankruptcy filing from the bankruptcy court. Once you have filed creditors are prohibited from calling, sending letter, filing or going forward with lawsuits, garnishing wages, repossessing vehicles or doing anything else to try to collect debts, unless they have received an order from the bankruptcy court to allow them to proceed. This will usually happen with a house or car loan where the creditor wants to start a foreclosure or repossession action, but they will need to get approval from the court first, and you will be notified before anything can happen and have a chance to object to the court and show why the creditor should not be allowed to move forward with collection activities. Credit card companies and other bill collectors are required to stop harassing you, and if they don't they can even be ordered by the bankruptcy court to pay you money. If you wages have been garnished that will stop and we can often even get back some, if not all, of the garnished wages.

Is bankruptcy my only or best option?

Even speaking to an attorney about bankruptcy can be very difficult for many clients. It usually comes after the debtors have spent months, if not years trying to do everything they can to avoid the need to look at the bankruptcy option. Most people we meet with want to pay back their debts and have tried everything they can think of to do just that, but have reached the point where they simply don't see any other way out. Our first step in discussing bankruptcy with any client is to see if there might be another option for them and if so to move them to that other route. But many times, due to job losses, medical problems, divorce, constantly rising expenses or other events outside of your control, bankruptcy can be the only real possibility to make a new financial start in life and remove what can be a crushing burden of debt from your shoulders. Part of the recent changes to the bankruptcy act will require you to seek credit counseling prior to filing bankruptcy, and to take a debtor financial education course after filing, to help assure that you will not ever find yourself in the same again. We will provide you with sources for both pre filing and post filing credit counseling, both of which can be done on-line or over the phone. If you file under Chapter 7 you will not be eligible to file again for eight years, so it is extremely important that debtors make any necessary changes in their spending habits to assure that they do not find themselves deep in debt ever again. For most debtors this is something they never want to go through again and all they need is the chance to have fresh financial start.

Should I use the equity in my home or a loan against my pension to avoid bankruptcy?

While the choice to access those assets is ultimately up to you, we strongly advise debtors to consider the long term effect of those actions. If you file for bankruptcy relief under Chapter 7, credit card and other unsecured debts are generally discharged completely. However, while secured debts are discharged, the security interest is not, and therefore to keep your home or pension, you will need to pay back those loans. Many times we see debtors who have taken out second, third, even fourth mortgages against their homes to attempt to pay off their credit card and other unsecured debts. But they haven't changed their spending habits and they end up with large credit card debt and no equity left in their homes. The same applies to pension loans. The equity in your home or your pension will generally be yours to keep in the bankruptcy, but if you have taken out that equity through a home equity loan or pension loan, there is no longer any exemption and you will have to pay those loans back.

How long will the bankruptcy take?

The process of filing bankruptcy and obtaining a discharge of your debts will take approximately three months after filing. The filing is now done by computer, and we will prepare all the required schedules to file, based on the information and financial records you provide. You will be required to attend a Meeting of Creditors before a bankruptcy trustee, who is appointed by the court to manage the bankruptcy case and to pay creditors from any nonexempt assets. The Meeting of Creditors may sound scary, but they go quickly, the trustees are very understanding, and will usually take less than five minutes once your name is called. Your attorney from our office will be there with you to answer any questions you have. To prepare your bankruptcy filing we need your pay records the last six months, tax returns for the last two years, bank statements for the last two months, and your most recent bills and statements for all of your debts, and if there are any court actions such as lawsuits, foreclosures or garnishments, we will need any paperwork you have received in those cases as well. You will need to list all your debts, even those to friends and family. You can still pay them back, you just have to list them. We will give you with a packet of information to help you organize your debts and provide us with the necessary information to prepare your bankruptcy filing. The filing process is very quick once we have all your information.

Will bankruptcy ruin my credit?

Many people who come to our office to discuss the option of bankruptcy are concerned that if they file bankruptcy it will destroy their credit and that they will never be able to get a loan again. Filing bankruptcy is an important decision and it will remain on your credit record for up to ten years. However, by the time we see most debtors, they have come to us because they are already missing payments with their creditors, collection agencies are calling, and lawsuits may have even been filed to collect outstanding debts. In other words, many clients have already had their credit records badly damaged, and filing bankruptcy may be the only way out of their crushing debt. After filing bankruptcy, the most important thing will be that clients make sure they pay their ongoing expenses and any remaining debts on-time and rebuild their credit. Creditors know that debtors coming out of a Chapter 7 bankruptcy will not be able to file again for eight years, and that they will have little or no remaining outstanding debts. Often, this means they are a much better credit risk, than someone who is still trying to hang on, taking out new credit to use to pay their existing debts. We have clients who were able to take out loans to buy houses within just a couple of years from filing bankruptcy, because they made sure to pay their bills on time after filing for bankruptcy. After filing if you pay your car loan, rent, utilities, phone, cable and other bills on time, it will rebuild your credit.

We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code.

We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code.

The Bankruptcy claims and settlement attorneys at Singer and Pasley are dedicated to serve their clients in central Iowa, including the cities of Ames and Des Moines, and the communities that make up Story and Polk County.

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