Car Payments and Bankruptcy Laws in Iowa

Car Payments and Bankruptcy Laws in Iowa

Keeping personal property is usually a big concern for Iowa residents filing for a personal bankruptcy and rightfully so. Keeping your property all depends on what chapter you file and what the property’s valuation. Your car, like your house, also depends on whether you are current of behind on your monthly car payments.

Ways to Keep Your Car in an Iowa Chapter 7 BK

Bankruptcy Laws in Iowa

First and foremost, the vehicle exemption law in Iowa allows you keep up to $7,000 in equity of the car. If you are still making car payments you can compute the equity in your car by subtracting the amount you still owe from the value of the car. For example, if you owe $9,000 on a car that is only worth $6,000 you have negative equity and you can exempt it from bankruptcy, although you now have an upside-down auto loan so what’s the point? On the other hand, if you have a car worth $14,000 and you only owe $10,000 you have $4,000 worth of equity and you can still exempt the car.

You can also reaffirm the debt. Typically, if your filing for an Iowa chapter 7 bankruptcy and your car has more than $7,000 in equity, you must hand it over the trustee to repay your creditors, unless you reaffirm. This means if you are still making payments (and your payments up to this point have been on time) you can sign a legally enforceable agreement stating you will continue to the pay the loan as originally indicated.

A third option is to settle with your trustee. Basically it’s the same as reaffirming your debt, but you are working with your trustee and not the lender. If you have a car that is paid off and it is worth $10,000 but you are only allowed to exempt $7,000 in Iowa you can pay the trustee the difference of $3,000 to keep the vehicle. Although, if you have kind of cash lying around they might advise you to file a chapter 13 repayment plan.

Which brings us to the last option, filing a chapter 13. As previously stated, an Iowa debtor is allowed to keep all property in a chapter 13 bankruptcy, including your car. At this point your car loan is included in your judge appointed repayment plan.

Should I Keep My Car or Get a New Car Loan After Bk?

We understand all Iowa debtors wanting to keep their personal property, but in some cases keeping your vehicle in chapter 7 is not the best financial decision. If you’re upside down on the loan you have the option to walk away from the loan and get into a new right-side-up loan.

Here at we can help all Iowa bankruptcy clients find a dealership in their area that can get them approved for a new car loan following bankruptcy discharge. These loans can help you get back on your feet and back into a good credit score. Apply online today to see what you could qualify for.

Remember, we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.

Auto Loans After Bankruptcy

Apply & Drive Today