Read the real story on Debt Settlement

NY Times: Debt Settlers Offer Promises but Little Help

Tyna Carter, burdened with $25,000 in credit card debt, did not want to be a deadbeat. After looking for help on the Internet, Mrs. Carter, a West Virginia homemaker, wound up in the hands of a sweet-talking “credit specialist” from Texas.

He claimed his company, Credit Solutions of America, could set her on the road to a debt-free life. But what really happened, Mrs. Carter says, is that Credit Solutions pocketed nearly $4,000 of the couple’s income, a little bit each month. Now they are in a deeper hole than ever.

New York Times- Debt Settlers Offer Promise but Little Help

NY Times: "Debt Relief" Headaches

Travis Plunkett, legislative director of the Consumer Federation of America in Washington, said distressed borrowers who cannot produce lump sums to settle with creditors were the most vulnerable to dishonest companies. In some cases, these companies tell consumers to stop paying monthly minimums, explaining that they will negotiate a settlement when borrowers have saved enough. Meanwhile, they take hefty monthly fees directly from clients’ bank accounts.

New York Times: Debt Relief Can Cause Headaches of it's Own

Also Note: Negotiated debt reduction may be taxed as income by the IRS while debt discharged in bankruptcy is not taxed as income.

Wall Street Journal on Pre-Bankruptcy Planning

Rethinking Bankruptcy

Bankruptcy is a key component of this country's safety net. If you plan ahead, it doesn't have to wipe you out.

By BRETT ARENDS

There's a surge in personal bankruptcy filings at the moment, for obvious reasons. Some 30,000 Americans are filing each week, and the figures could top 1.4 million for the year.

But too many people are talking about bankruptcy as if it's a sign this country's social safety net has failed.

It isn't. Bankruptcy is part of the safety net. Other countries have welfare states, America has bankruptcy. And so long as you plan ahead, it doesn't have to wipe you out.

Read Wall Street Journal Bankruptcy Planning Article

Can my wages be garnished in Iowa?

The Iowa Code allows judgment creditors to garnish your wages.

Section 537.5105 generally limits the Iowa wage garnishment to 25% of disposable earnings per payday.
Code section 642.21 addresses how much of your wages can be garnished annually based on your income level.

Note: These creditors can also garnish your bank accounts. I have had many many clients shocked when a creditor removes all of the money from their account causing their outstanding checks to bounce resulting in big overdraft fees.

Filing bankruptcy stops both wage and bank garnishment.

How long does a judgment last in Iowa?

Judgment creditors have 10 years to collect on a judgment unless they renew the judgment. If they renew the judgment (and renewal is automatic if they request it), then the judgment creditor gets an additional 10 years (total of 20 years). Judgments may only be renewed once. After 20 years, then the judgment becomes uncollectable.

Are my taxes discharged?

If all four answers are YES the taxes should be dischargeable.

1. Are they income taxes?

2. Was the tax return due more than three years ago? (returns are due on April 15th of the following tax year)

3. Was the return filed more than two years ago?

4. Was the tax assessed by the IRS more than 240 days ago?

(see your tax transcript)

Note- Property taxes assessed before bankruptcy, sales taxes and withholding taxes are never dischargeable.

Also- Debt discharged in bankruptcy is not taxable, even if you receive a 10-99.

Can I discharge my Student Loans?

Most student loans can not be discharged. In order to discharge student loans you must file and adversary proceeding (a lawsuit within your bankruptcy, see Bankruptcy Rule 7001) and show undue hardship.

Undue hardship requires “a certainty of hopelessness that the loans will be repaid.” U.S. Dept. of Educ. v. Meling, No. 01-2027, 2002 WL 32107248, at *5 (N.D. Iowa Jan. 22, 2002) (Melloy, J.); In re DeBrower, 387 B.R. 587, 591 (Bankr. N.D. Iowa 2008); contra In re Cumberworth, 347 B.R. 652, 657 (B.A.P. 8th Cir. 2006). The standard for student loan discharge is intentionally set very high. DeBrower, 387 B.R. at 591. See recent discussion of Student Loan Bankruptcy Discharge in Iowa.

The undue hardship test under § 523(a)(8) is fact intensive and requires the court to examine the totality of circumstances of each case. In re Long, 322 F.3d 549, 554 (8th Cir. 2003). The totality of the circumstances test includes an examination of the following factors:

(1) the debtor’s past, present, and reasonably reliable future financial resources;

(2) a calculation of the debtor’s and her dependent’s reasonable necessary living expenses; and

(3) any other relevant facts and circumstances surrounding each particular bankruptcy case. Simply put, if the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt – while still allowing for a minimal standard of living – then the debt should not be discharged.

Is it best to file bankruptcy before or after Divorce?

Because 11 USC 523(a)(15) excepts from discharge debt ordered in a divorce decree, it is normally better to file your bankruptcy before your divorce decree is entered.

11 United States Code 523(a)(15): Iowa Bankruptcy & Divorce
(Bankruptcy does not discharge debt ordered paid) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;

Will I ever get credit Again?

Boston Globe- Study says bankruptcy can bring more loans

Boston Globe
NEW YORK - Personal bankruptcy may increase the amount of revolving credit, such as credit cards, that debtors can access, according to a study by economists at the Federal Reserve Bank of Boston.

It found that those who are poor and have low credit scores are quickly able to borrow again, and frequently end up with higher loan limits.

The results run counter to a widespread and long-held assumption that bankruptcy punishes debtors by cutting off access to credit for some period of time, the authors said. The study found 90 percent of individuals have access to some sort of credit within 18 months of filing for bankruptcy protection, and a quarter of those get more credit.

Should I file Bankruptcy?

I never feel comfortable answering this question. I think it is a personal decision. If you have a reasonable alternative like repayment via Consumer Credit of Des Moines, selling valuable assets to pay off debt, a family member who will pay off your debt or borrowing from family at no interest I would take that option and not file bankruptcy.

By the time they get to me most people do not have any reasonable options left. Some people feel better about their decision to go forward with bankruptcy if they try repayment first. Whatever you do, don't fall for a distant online debt settlement company. If you are going to try and pay your debt, do it through a reputable, local firm like Consumer Credit of Des Moines.

Counties Served

Adair, including the cities of Adair and Greenfield, Adams, including Corning and Lenox, Iowa Appanoose, Audubon, Boone, Cass, Clarke, Clinton, Dallas, including Adel, Clive, Grimes, Perry, Waukee, and West Des Moines, Davis, Decatur, Des Moines, Fremont, Greene, Guthrie, Harrison, Henry, Jasper, Jefferson, Johnson (Iowa City), Keokuk, Lee, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Monroe, Montgomery, Muscatine, Page, Polk (Des Moines area), Pottawattanie, Poweshiek, Ringgold, Scott, including Bettendorf and Davenport, Shelby, Story (Ames), Taylor, Union, Van Buren, Wapello, Warren, Washington, and Wayne counties.

If you are in one of these counties, contact Jeff Mathias if you have questions.

If you are not in one of these counties, email Jeff for a referral to an attorney in your area. Tell us what county you are in.

United States Bankruptcy Code

Federal Constitution and Statutes
Federal Bankruptcy Code -
Title 11 of the U.S. Code. Title 11 is currently subdivided into eight chapters:
Chapter 1. General Provisions, Definitions and Rules of Construction. Includes who is eligible to file re. residence issues.
Chapter 3. Case Administration
Chapter 5. Creditors, the Debtor, and the Estate. Includes protection against discrimination for filing bankruptcy.
Chapter 7. Liquidation. Includes Redemption of property, see also 722Redemption.com.
Chapter 9. Adjustment of the Debts of Municipality
Chapter 11. Reorganization. Includes who may file a Ch 11 plan.
Chapter 12. Adjustment of the Debts of a Family Farmer with Regular Annual Income
Chapter 13. Adjustment of the Debts of An Individual With Regular Income. Includes contents of the Chapter 13 plan.
CRS Annotated Constitution

Famous & Bankrupt

Feel guilty about bankruptcy?
Don't.
It is a great American tradition.

To get him out from under foot, in 1690 King Charles II granted William Penn an estate in the American colonies. Penn created a Quaker refuge and his manager borrowed to the hilt on the estate and fled with the money. Penn was left holding the bag and ended up in a British debtors prison. His former estate became the State of Pennsylvania.

Meriwether Lewis of Lewis & Clark fame, sent by President Jefferson to map the western territory went into debt to fund his explorations. He later stabbed himself to death on the way to debtors Court in St. Louis.

Frontiersman Daniel Boone borrowed to fund his fur-hunting expeditions, but it did not always work out. In some cases unfriendly Indians took his fur in exchange for letting him keep his scalp. Boone's lawyer said he had more lawsuits entered against him than any other man of his day. Boone's motivation for settling Kentucky was to avoid his creditors back east.

Abraham Lincoln's Illinois general store failed. After winning a spot in the State Legislature, Abe noticed his horse and saddle were gone. They were repossessed by the Sheriff! Later, he confided to a friend that debt was his life's greatest obstacle. Honest Abe also practiced Bankruptcy Law in Illinois before moving on to hold the United States together as President during the Civil War.

A resort investment gone bad led to Las Vegas superstar Wayne Newton's fresh start in 1992. Casino gambling was not approved for Pennsylvania after all and Newton lost his shirt.

Musician Mick Fleetwood got his fresh start in 1984 after taking a financial dive investing in Australian real estate and oil and gas.

Conrad Hilton lost all his hotels when he could not pay his bank during the great depression. Later, he bought them all back and built a few more.

J.C. Penney's first store went bankrupt when he refused to give Whiskey as a kickback for orders from a large customer. Penny went belly up and got a job in a drapery shop which he later purchased and expanded into 1100 department stores nationwide.

Famous Architect Frank Loyd Wright lost his home, Taliesin in Wisconsin and was thrown on the street when business dried up in 1922. During the following decade, he designed some of his most famous projects.

American Author Mark Twain spent nine years in Europe avoiding creditors of his defunct typewriter invention business. Twain returned to the United States in 1864 to file bankruptcy.

President Ulysses S. Grant lost his fortune in an early Ponzi scheme. Mark Twain helped Grant write his memoirs while Grant suffered from Cancer so the proceeds could support his family after his death.

Harry Truman opened a shop in Missouri after the First World War only to have it fail. He was humbled by having to move in with his mother-in-law. Truman settled his debt for pennies on the dollar when his bank went bankrupt! Later, he got a good job, in Washington, DC.

Roland Hussey Macy failed at selling ribbons, provisions to miners and at a general store before going bankrupt in 1855. His next effort, Macy's became the worlds largest store.

While in debtors prison, Charles Goodyear experimented with rubber mixes. Later he accidentally created weatherproof rubber by mixing in sulpher and applying heat. Goodyear had poor patent protection. The Goodyear company was named in his honor only, he saw few profits himself.

Walt Disney lost his company in Kansas City and moved to California with $40 in his pocket where he started another business.

Country Music Singer Willie Nelson got his fresh start after the IRS disallowed tax deductions and demanded a $9,000,000 check. Ouch!

Oskar Schindler spent all the money he had to feed, cloth and provide medicine to the 1098 Jews he saved while operating a factory in Poland during WWII. Schindler was en route to debtors prison when the people he saved and their families combined funds to pay off his debts and support Oskar until he died in 1974.

Actor Gary Burghoff, "Radar" from the film and TV series M.A.S.H. hit hard times after the show ended, filing bankruptcy in 1991. Now he sells his wildlife drawings for up to $25,000 each.

Famous "G Man" Eliot Ness (who captured the notorious Chicago Gangster Al Capone) tried politics in Cleveland but lost in a landslide after spending every dollar he could muster. His book "The Untouchables" bombed. After Ness died, his exploits were made famous in television and film; too late for Ness to benefit.

Film director Francis Ford Coppola's disdain for tight studio budgets led him to finance his own films. He made a movie called "One from the heart" for $30,000,000 and it produced $636,000 in revenue. But Coppola also directed The Godfather series, so all is forgiven and then some.

John Wayne Bobbitt gained fame when his wife, in an act of rage, removed his manhood with a razor. A 12 hour surgery successfully resulted in re-unification. When the uninsured Bobbit later went bankrupt, his doctors remarked, "He stiffed us", really.

Sam Walton's first store was a Ben Franklin discount shop which he made one of the most successful in the chain. Walton's problem was a short lease, when it expired, the buildings owner canceled his lease and took over the store himself. Walton had to start from scratch. He later created the largest company in the world and became a billionaire.

Rapper MC Hammer, unable to continue support of his 70 member posse, filed bankruptcy in 1996 saying, "It's time to stop bleeding and get on with my life".

Iowa Bankruptcy Attorney Jeff Mathias

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Read the real story on Debt Settlement

NY Times: "Debt Relief" Headaches

Wall Street Journal on Pre-Bankruptcy Planning

Rethinking Bankruptcy

Bankruptcy is a key component of this country's safety net. If you plan ahead, it doesn't have to wipe you out.

By BRETT ARENDS

Can my wages be garnished in Iowa?

How long do I have to wait between Filings?

Are my taxes discharged?

Can I discharge my Student Loans?

Can I lose my job for filing bankruptcy?

Is it best to file bankruptcy before or after Divorce?

Will I ever get credit Again?

Are Unemployment Benefits Overpayment Discharged?

Should I file Bankruptcy?

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