One of the most common questions that I receive from people contemplating filing for bankruptcy is, “Am I going to lose everything if I file for bankruptcy?” The trepidation of losing everything that you have worked hard to obtain is usually the reason that people hesitate to file. The bottom line is that the state of Iowa has quite liberal exemptions and is a good state to file in.
So, what is the difference between an exempt asset and a non-exempt asset?
An exempt asset is an asset protected from the Bankruptcy Trustee and from your creditors during bankruptcy. Examples of these include:
- HOMESTEAD: The equity in your house is exempt (to a certain extent). For instance, if you own a home that is worth $300,000 and you have a mortgage against your house for $200,000, then you have $100,000 in equity in your home. Depending on how long you have resided there and when the majority of your unsecured debt was incurred determines the extent of your exemption. That is why it is imperative to retain a qualified attorney to provide you with the legal advice that you need to save your home in a bankruptcy proceeding.
- AUTOMOBILE: The equity in your car (which is the difference between the amount that you owe on it and its fair market value) is exempt. For instance, if your car is worth $7,000 or less (or if you have $7,000 or less of equity in a financed car), then your vehicle is exempt.
There are many more exemptions in Iowa, including personal property, retirement accounts, wild card, etc. In order to determine whether or not your assets fall into an exemption, it is necessary to obtain legal advice from a qualified bankruptcy attorney. Sometimes a person who qualifies for a Chapter 7 bankruptcy may choose to file a Chapter 13 bankruptcy in order to retain certain assets that they would otherwise be at risk of losing in a Chapter 7.
In reality, most people that file for bankruptcy have very few, if any, non-exempt assets. Those that do have assets that they want to protect can do so in a Chapter 13 bankruptcy. You will not know until you sit down with a bankruptcy attorney who can explain this to you in detail and assess your personal circumstances. Do not rely on a Google or AI search – I have seen too many pro se debtors lose assets that they otherwise wouldn’t have if they had listed their personal property properly and claimed the correct exemption that they were entitled to under law.