The most common desire for most potential bankruptcy debtors in Iowa is to simply get rid of unsecured debt in a Chapter 7 filing. However, if your income is too high and, based on the "means test" analysis you do not qualify for a Chapter 7, you still have the option, no matter what your income, to file a Chapter 13 repayment plan and force your creditors to accept payments you can afford given your income and expenses. According to Iowa bankruptcy law, everyone in Iowa qualifies for a Chapter 13 bankruptcy, regardless of income.
A Chapter 13 plan, also called a wage earner repayment plan, is unlike a Chapter 7 in that this form of bankruptcy requires that a debtor repay some amount to his or her creditors by making a monthly payment over a 36 to 60 month plan. According to Iowa Bankruptcy law, the amount of the monthly payment and the length of the plan is dependent upon your income. A Chapter 13 bankruptcy plan is similar to a debt consolidation plan often offered by other agencies but is different, and more attractive in that, with a debt consolidation, the Chapter 13 Plan requires all creditors to take part, it is not on voluntary, and can include all debts including medical bills and all other debts.
A Chapter 13 repayment plan does not require that you pay your creditors back 100%. You pay your creditors based upon your ability to pay. Any unsecured debts that are not paid by the end of your plan are discharged and forgiven, just like in a Chapter 7 case.
Debts are paid back without interest. The amount you owe any creditor is frozen at the date the bankruptcy petition is filed and the amount you pay your creditors in your repayment plan does not grow larger over time with interest.
To learn more, view a complete comparison of Chapter 13 Bankruptcy and Debt Consolidation.