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Can I Keep My House and Car If I File for Bankruptcy in Iowa?


The first question many clients ask us with respect to bankruptcy is, “Can I keep my house?” Or if they do not own a house, maybe they’ll ask about keeping their car or property necessary to run their business. Basically, there is a lot of confusion surrounding what property a debtor may keep when filing for Chapter 7 or Chapter 13 bankruptcy.

Federal vs. State Bankruptcy Exemptions

The thing you need to understand is that bankruptcy is not about leaving you with nothing. To the contrary, it is about giving you a “fresh start” free of crippling debts. It therefore would not make much sense to force a debtor to give up all of their property as part of the bankruptcy process.

Instead, federal and state law provide a number of exemptions from bankruptcy. If property is “exempt,” that means you do not have to turn it over to a court-appointed bankruptcy trustee. The property remains yours and cannot be touched by the trustee or your creditors.

Federal law provides for a default set of bankruptcy exemptions. Individual states, however, may adopt their own exemptions and require their residents to use them. Iowa is such a state, so if you file for Chapter 7 or Chapter 13 bankruptcy here you must use the state exemptions.

Iowa’s Homestead Exemption

Fortunately, if you do own a home, Iowa’s bankruptcy exemption is quite generous. Iowa allows a debtor to exempt a homestead–a single home where the debtor actually lives–regardless of its current market value. The only restriction is on the amount of land subject to the homestead: If you live in a city, it cannot be more than one-half of one acre, but anywhere else in the state you can exempt up to 40 acres.

Note that if multiple people live in a house together, they can only utilize a single homestead exemption for the property. In other words, if a married couple jointly files for bankruptcy, they cannot “double” the exemption and claim two properties or 80 rural acres. While some states permit such double exemptions, Iowa does not.

Motor Vehicle & Other Personal Property Exemptions

Now what about your car? Iowa allows you to exempt up to $7,000 of equity in a single motor vehicle. So if your car is worth less than $7,000 when you file for bankruptcy, it is fully exempt. But keep in mind, if you used the vehicle to secure a loan the lender may still repossess, even if the car is exempt from the bankruptcy process.

Similar to the motor vehicle exemption, Iowa also exempts other categories of personal property up to a certain dollar limit. Some common examples include private libraries and art collections (up to $1,000), wearing apparel and household goods (up to $7,000), and jewelry (up to $2,000).

Have Questions About Bankruptcy in Iowa?

This is only a brief overview of some of the property that Iowa exempts from bankruptcy. If you have additional questions or need advice on any related matter from a qualified Southeast Iowa bankruptcy attorney, contact the Noyes Law Office at 641-472-3236 or 800-875-7148 to schedule a free consultation today.

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