For most of the last century, even as the availability of credit has exponentially increased for all Iowa consumers (including those borrowers without employment and absolutely frightening payment histories), citizens of the United States knew that, at the worst possible case, they would at least be able to declare bankruptcy in order to eliminate problem debts and start their lives anew. There’s obviously some ethical qualms most upstanding consumers feel about the procedure – nobody wants to think of themselves as running away from debts – but Americans from Mark Twain to Henry Ford to Abraham Lincoln have found themselves requiring governmental assistance at desperate points in their lives, and, given the ongoing economic downturn, Iowa families should not avoid asking for help because of issues of morality. However, in the same way the credit has so dramatically mutated over the past generation, the Chapter 7 and Chapter 13 bankruptcy programs have also been utterly distorted through misguided legislation pushed through the U.S. congress just three years ago, and the resulting morass of conflicting codes and unnecessarily punitive regulations force our poorest citizens to jump through hoops, lay either their possessions or their household budget subject to the whims of a trustee chosen at random by the Iowa courts (who will have to diligently follow frameworks designed by the Internal Revenue Service), and pay through the nose for the mere opportunity.
With things as they are, not only are the qualifications for successful bankruptcy declaration far more challenging for Iowa borrowers, but the legal minutiae and various conflicting Iowa and national statutes can be a nightmare of doublespeak for ordinary borrowers to navigate. Still, before any Iowa households endeavor to pay the increasingly high prices of experienced bankruptcy lawyers (who charge by the hour, prospective clients should remember), they should first learn as much as they can about the practical information surrounding modern bankruptcy and see whether or not they would even be considered eligible for the program: or, for that matter, whether it would truly do their family some good. Through this essay, we would like to smooth out – as much as would be possible in this relatively limited context – the more important complexities of Chapter 7 and Chapter 13 bankruptcy protection, examine the advantages and drawbacks of both programs, and also take a look at some of the new alternatives to bankruptcy available to Iowa borrowers. Indeed, many Iowa residents who would be far better served from another sort of debt relief alternative – whether consolidation loans or debt settlement negotiation – only realize the potential dangers of bankruptcy too late.
Once again, though most Iowans may feel that they intrinsically understand bankruptcy protection, the various Chapters (by this point, there are different Chapters covering everyone and everything from foreign nationals to family fishermen to towns and cities) offered by the United States government have grown so convoluted over that last few decades that only trained attorneys and debt specialists could really claim to understand much more than the basics of the bankruptcy proceedings. Within our space here, your authors wish to discuss all parts of bankruptcy protection, from the initial petition to the eventual discharge, so that Iowa debtors could intelligently evaluate their possibilities and fully understand the errors too commonly made by uninformed consumers. As with any aspect of financial matters that could theoretically haunt the Iowa family for years to come (beyond the negative repercussions to borrower’s credit ratings and the lingering risk of asset seizure by Iowa court agents, criminal charges may even be imposed for improperly filled out paperwork), a serious and intensive bout of research should be thought necessary before the heads of household take action. The more that Iowa borrowers know before they begin working with bankruptcy lawyers – whose expertise should be considered virtually essential to successful bankruptcy declaration given the intricacies of the modern United States bankruptcy code – the less tension they will have and the more able they will be to foresee potential trouble spots down the road.
Throughout the history of bankruptcy protection within Iowa and the United States as a whole, the grand majority of cases have been Chapter 7 debt elimination bankruptcies. When speaking to Iowa consumers, many of them are not even aware that other forms of bankruptcy exist for individual debtors. Certainly, given the potential for liquidation of all unsecured debts (primarily, this day and age, credit card bills and those debts resulting from medical procedures or hospitalization), Chapter 7 bankruptcies are the most attractive form of governmental protection. However, as with so many aspects of bankruptcy following the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Chapter 7 bankruptcies also contain a great deal of inherent tribulations for unknowing Iowa borrowers. Indeed, many Iowa borrowers, despite their vaunting consumer debt loads, may not even be extended Chapter 7 protection should their earnings be deemed too high. That’s right, in the years after BAPCA legislation, Iowa residents have been denied Chapter 7 no matter how large their collected debt balances may be. In order to be considered eligible for Chapter 7 debt elimination bankruptcies, borrowers who are judged to be permanent residents of the state of Iowa must have made less than the median income of the average Iowa citizen. The prospective bankruptcy participant’s income will be judged based upon a previous period six month prior to the filing of bankruptcy papers and then prorated. This element of the new laws could be potentially catastrophic for the chances of borrowers that happened to have had an extraordinarily good season of earnings just before tragedy struck and has been proved to demonstrably undermine the opportunities for protection of so many Iowa borrowers that have seen their wages cut or business fall off during this sudden recession.
As of October, 2008 (obviously, this information continually changes along with census information and Internal Revenue Service tabulations so curious debtors should take a look at the most current data on line or by calling the appropriate Iowa authorities), the Iowa median gross annual household income for a single resident would be thirty nine thousand dollars. For an Iowa household with two members, the income would be fifty two thousand; for three members, it would be sixty one thousand; for four members, seventy one thousand dollars; for five members, seventy seven thousand dollars. For Iowa households with further members, add another six thousand dollars. Income that Iowa residents derive from social security benefits regardless of their amount will not be included under this provision. Nevertheless, this still renders Chapter 7 protection beyond the grasp of many deserving Iowan borrowers even as the costs of the service continue to rise. Ridiculous as it may seem, the funds necessary for Iowa consumers to declare bankruptcy has rapidly escalated over the past few years – just as the numbers of hard working men and women truly needing assistance with their towering financial obligations has tripled in conjunction with the larger economic peril threatening all Americans – and too many deserving Iowa citizens have honestly been priced out of the hope of bankruptcy.
As things now stand, the administrative fee for filing the original bankruptcy petition is just under three hundred dollars for either individual debtors or married couples, and all borrowers should note that they will have to present money orders to the Iowa county clerk. Personal checks won’t be accepted, and, of course, the county doesn’t accept credit card payments. The cost of petition, though, is only the beginning of the actual cost of Chapter 7 and Chapter 13 bankruptcy under the new statutes. Since 2005, the government has insisted that each potential bankruptcy filer take a class on debt maintenance that they shall have to pay for themselves before they can turn in their initial paperwork: and take them again before the discharge of their debts will be formally approved! Not only can the charges for these courses – which are essentially pointless exercises in common sense instituted by the congress as a hindrance for ordinary consumers merely trying to relief their debt loads (debt loads that, often as not with the health care crisis in Iowa and all of America, weren’t even their own fault) – be more than some debt ridden households could easily bear, but in order for Iowan consumers to even have the opportunity to spend that money to take the courses they will likely need travel to Des Moines for governmentally certified counselors. As should be obvious, above and beyond the financial constraints, many Iowa families already attempting to juggle several jobs alongside household responsibilities in efforts to repay their loans simply may not have the time to comply with such foolish errands.
Of course, all of these costs are as to pennies as compared to the ever more grand prices demanded by bankruptcy attorneys schooled and proficient in both the local Iowa statutes and exemptions as well as the federal guidelines which seem to change by the week. The Iowan borrowers who are thinking about the Chapter 7 debt elimination bankruptcy, for instance, should recognize just how much they have to lose by ignoring the aid of trained operatives. Chapter 7, at least considering the original sense in which the protection was implemented, was meant to liquidate not only the debts held by the consumer in question but also to liquidate all of the consumer’s assets as well. Indeed, this was generally thought to be the ultimate consequence of bankruptcy protection, and, alongside the unrelenting shame of requesting governmental help in settling personal affairs, the likely seizure of household all pertinent possessions was the main threat warding off the free spending jackals from taking advantage of the social safety net. For the past few generations, however, ordinary residents of Iowa didn’t need to overly concern themselves with the letter of the law because the trustee appointed by the Iowa courts would make certain that households shouldn’t unnecessarily endure deprivation. The fresh amendments to the bankruptcy code, however, place limitations upon the judgment of the court trustee and further demand that everything reasonably claimed to be owned by the Iowa borrower must be listed upon the bankruptcy petition by dint of potential replacement value.
More than the residents of most states, Iowans are somewhat protected from the worst tendencies of a national congress propelled by the financial pressure of the credit card industry. The Iowa legislature enacted certain safeguards above and beyond the meager exemptions to Chapter 7 bankruptcy protection. Iowa borrowers are allowed to maintain one shotgun and one rifle, household clothing and luggage not to exceed replacement value of a thousand dollars total, a wedding ring that’s not to exceed two thousand dollars value, the family library (including family portraits) below one thousand dollars of value, burial plots less than one acre, household furnishings and appliances less than two thousand dollars in value, and all pensions and retirement funds. Veteran’s benefits, disability benefits, public assistance, and proceeds from life insurance of less than fifteen thousand dollars are similarly exempted. The Iowa state bankruptcy code lists a good deal more in the way of these personal bankruptcy exemptions with far greater complexity – the various regulations concerning the Iowa homestead exemption alone should reel the mind of the average borrower unschooled in finance – and this is yet another reason why experienced bankruptcy attorneys have become so dearly necessary to the bankruptcy process. With so much riding on the outcome, even the simplest bit of paperwork involved would best be handled under the advice of skillful legal representation.
Before they do anything else, there’s a number of documents which must be gather by the Iowa household before they can fill out the bankruptcy petition, and, though it isn’t strictly necessary, your authors would recommend the borrowers also bring the paperwork along before they talk to their lawyers. Filers should carry their Social Security Cards and state issued identification (an Iowa Driver’s License, presumably). The pay stubs of proof of wages from the last two to three months, depending upon the sort of employment, will be required. For potentially bankruptcy Iowa borrowers that operate their own businesses or would otherwise be considered self employed, six months to a full year’s worth of bank statements should be provided along with a profit and loss statement calculated by a Certified Public Accountant licensed by the state of Iowa. As well, they should bring copies of all income and property tax records – both state and federal – for the past two years prior to bankruptcy petition and especially the W-2s. For home owners, there’s a good deal more documentation to be assembled. Iowans seeking a quickly expedited bankruptcy hearing must acquire some proof of residency such as a property tax statement or title deed, and, to prevent governmentally assigned evaluation (which, oddly enough in this instance, always seems to come a little shy of the property tax valuation), it’s probably a good idea for Iowan home owners to also pay the three to five hundred dollars so that they can ensure an honest and unbiased appraisal of the property’s market price.
After a bankruptcy petition is successfully filed, there will be around four weeks wait before the hearing and, then, should everything go as planned, the Iowa courts will finalize the discharge of all applicable unsecured debts through Chapter 7 debt elimination protection within three months (traditionally, the discharge process only takes nine weeks, but, things as they are around Iowa, bankruptcy courts have been booked solid. Chapter 13 bankruptcies – though they remain the sole preserve of home owners fearing imminent foreclosure or those borrowers who, for tax reasons explainable only to the household and the household’s certified public accountant, think that their family finances would best be served by maintaining debts at length – can linger for more than five years before discharge as the borrower slowly repays his obligations. Every bankruptcy petition, by definition, will be considered a federal matter and the borrower’s case shall be decided in federal court. However, our state residents shall still file locally and whether or not the heads of household work with the Northern or Southern Iowa District Court both will equally apply towards the entire state as well as the national code.
Most importantly, by any measure, Iowan consumers considering filing for Chapter 7 or Chapter 13 bankruptcy protection should collect all essential information (amounts, minimum payments requested, identity and address of the lender, number of the specific account, and any other data that may conceivably be of some use) about the loans that they plan to liquidate through the bankruptcy process. As well, borrowers should have available all of the same information on hand about even those loans – especially those loans of the larger, secured variety that are attached to real property like homes and boats and vehicles – that they wish to keep. Secured loans aren’t part of Chapter 7 bankruptcy, as should seem obvious, since the collateral could so easily be reclaimed if the Iowa debtors do not pay their bills on time. Filing for bankruptcy protection does allow the borrowers who’ve fallen behind the ability to catch up and potentially even restructure the bills under supervision of the Iowa courts. If nothing else, the bankruptcy procedure will immediately forestall any repossession or foreclosure threats no matter how late date, and, as seems to be happening all too frequently given the free fall in real estate value throughout all parts of Iowa, borrowers could attempt to discharge money that was owed upon their home loan should the current equity value upon reclamation be less than the current mortgage value. Negative amortization mortgages have left so many of our state’s residents helplessly, as the term has it, upside down in their equity, and, even though most of the predatory sub prime mortgage lenders have thankfully been driven out of business following the industry’s collapse, the carnage wrought by their loans still remain to threaten the residences of proud Iowa home owners.
Considering the poor track record of second mortgages, debt consolidation equity loans should seem an especially poor choice for worried Iowan debtors, but the regular advertisements continue to tempt unknowing consumers. In the same way, the Consumer Credit Counseling industry has needlessly attracted thousands of followers despite their associated companies offering little more than budgetary advice and reductions of interest rates alongside lowered monthly minimum payments which the credit card companies and other lenders are only too happy to provide to keep their Iowan clients from considering the Chapter 7 debt elimination bankruptcy program. Even though Chapter 7 bankruptcies are extremely difficult for ordinary Kansas consumers to both qualify for and then afford under current legislation, the creditors are honor bound to at least respect the possibility of total liquidation of holdings. Because of this tendency, the debt settlement negotiation industry – in this program, trained and certified debt specialists call the representatives of credit card companies and demand an immediate cut of the funds owed in return for a promise that the clients will avoid taking advantage of the bankruptcy solution – has won overwhelming praise from thousands of Kansas consumers over the past few years. Owing to the changes wrought by the current legislation, Chapter 7 bankruptcy may not longer be a viable alternative for most Iowa borrowers, but, if nothing else, the threat of bankruptcy can still aid Iowans in their fight against unsecured burdens.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
