For individuals in Iowa, there are basically two popular forms of bankruptcy. These are both important ways for debtors to release their obligations, but they serve very different purposes.
The choice of which type usually depends on many factors, but one of the most important is income. A person's income level would likely determine how successful a repayment plan would be. Please continue reading for more details on this subject.
First of all, the two types of bankruptcy discussed in this article are Chapter 7 and Chapter 13. These are both debt relief options that applicants must qualify for before they have a chance to receive the benefits.
Chapter 7 is a liquidation-based debt-relief option. As mentioned by the Iowa Bar Association, most people file for this type of bankruptcy. Under this structure, successful applicants would have debts removed in exchange for selling off all non-essential assets. There are some important exceptions, such as a homestead exemption for a primary residence. That means that, while Chapter 7 would probably involve selling off almost every luxury, it is not designed to put people in an untenable economic situation.
Chapter 13 would probably be more appropriate for those who have a steady and predictable income. As explained on FindLaw, payment plans could last for up to five years and are designed to repay creditors to the greatest extent possible. While there may be some liquidation involved preparing for a Chapter 13 plan, it would not be completely necessary for every situation.
Chapter 13 may be the more reasonable option for those who have significant assets or a regular income. However, there is no way to say for sure which type of bankruptcy would be more appropriate without a detailed review of the material situation in question.