In this video, we are going to talk about
exemptions. We are going to try to figure out what property
you get to keep through bankruptcy and what property might be exposed for the bankruptcy
court to take, and sell, and use the money to pay your creditors. In each bankruptcy case, a trustee is appointed,
and the trustee’s responsibility, and he has the power, to take from you any property
you can’t claim exempt – that’s not protected, and sell the property, and pay
your creditors with those funds. In most cases in Iowa, all property owned
by debtors are protected and exempt by the exemption statutes. Most people in Iowa, claim Iowa exemptions. If you have lived in Iowa for 2 years or longer,
which you will be allowed to do – claim exemptions. If you lived in another state 2 years ago,
you may have to claim that other state’s exemptions, that may or may not be of benefit
or harmful to you, but it probably doesn’t make a whole lot of difference. Iowa has fairly liberal, debtor-friendly exemption
laws, and I can tell you a little bit about them now, starting with your homestead. A home value, or equity in a homestead is
100% protected under Iowa law, so no matter what your home’s worth or how much value
you have in your home, it’s probably 100% protected. I say probably because there is one major
exception to that rule, and that is if you have any debts that you are trying to discharge
and get rid of in your bankruptcy that existed before you bought your house, or before it
became your homestead, then that homestead value is not protected, and the trustee can
sell your home and use the money to pay your creditors. So if you have any preexisting debt, debt
that existed before you got into your home, your homestead may not be protected or exempt. In a lot of cases, the value of the home doesn’t
matter, because if you owe a mortgage that is about up to the value of the house, there
isn’t any equity in it, and it doesn’t make any difference anyway. Also, there are some rules with regard to
if you own a previous home, and put that money, and when you sold that home into your current
home, then the lookback period for when you owned a homestead goes back to the previous
home or the one before that. So there are some rules that apply, but generally
speaking, your home is protected under Iowa exemption laws. Additionally, each debtor is allowed to exempt
a vehicle, up to $7,000 in value. That applies to one vehicle only, so if you
have, say, 7 vehicles worth $1,000 a piece, you cannot claim all of them exempt – you
can only claim one vehicle exempt and up to $7,000 in value. That includes the equity value of the vehicle. So if you have a $14,000 vehicle, and you
owe $7,000 on it, that would be protected because you have $7,000 in value and you can
exempt $7,000 in value on the vehicle. That’s for each person, so if a married
couple filed bankruptcy, there’d be an exemption for each party, assuming the car titles are
in each spouse’s name. There is a similar $7,000 exemption for household
goods and clothing. That usually covers most people’s value
of household goods and clothing, primarily because the value of the household goods,
furniture, appliances, is garage sale value. It’s not original cost or replacement value,
and although garage sale value is a bit of an estimate, its certainly much lower value
than replacement cost, and usually that covers most people’s furniture, appliances, and
household goods. Additionally, any pension account is 100%
protected. If it is ERISA-qualified, that is IRS-qualified
pension. This includes all 401k’s, IRA’s, 403B’s,
IPers, union pension accounts – 100% protected and exempt. There are however, some restrictions with
regard to how much you can contribute to an IRA in the 2 years prior to filing bankruptcy,
so you have to take a look at that before you file as well. Now is a good time to probably, remind you
NOT to do any selling of property, transferring property into other parties’ names, giving
away gift property – family members or anybody else, prior to seeing an attorney if you are
going to file bankruptcy. There is some pre-bankruptcy planning allowed,
some selling of assets, transferring of assets, or moving assets from one place to another
that is allowed prior to bankruptcy that could protect those assets. And that’s good pre-bankruptcy planning,
but it takes an experiences attorney to tell you how to do that correctly. If you transfer assets or sell them prior
to filing, you may be making a big mistake if you don’t do it on the advice of your
attorney. So don’t do any selling of assets of transferring
until you have spoken to an attorney that can advise you how to file bankruptcy correctly
and prepare for bankruptcy correctly. A few other exemptions allowed under Iowa
law, and an important one is the $10,000 exemption for tools of trade – can be any kind of
tools used in your work, mechanic’s tools, carpenter’s tools, things like that. That also applies to farming implements and
livestock – a $10,000 exemption, and that is valued also at auction sale value. Additionally, any workers compensation claim
you might have is fully protected and exempt. That’s true if you have the claim now, if
you’ve settled the claim and have settlement funds in a bank account – that is not exempt,
so in a worker’s compensation situation, it’s okay to file a bankruptcy while you
have that claim, so you can receive a settlement in the future after the bankruptcy is filed
and it’s going to be all yours. That’s not true in a personal injury situation,
it’s a little more complicated. Personal injury claim you have may or may
not be exempt, and you need to speak with your attorney to determine what exposure you
might have there prior to filing. There is a $1,000 exemption allowed for any
money in your bank account, per person. $2,000 for a joint couple that files, so if
you have savings in your bank account in excess of $1,000 a piece, you’re going to have
to do something with that money before you file, and speak to your attorney about doing
that. There are other exemptions for property, other
kinds of property, your attorney will be able to advise you with regard to that. The last thing I want to leave you with is,
don’t be transferring property or selling property before you file bankruptcy. You may be able to do that prior to filing
to protect additional property, but don’t do that without an attorney’s advice.