Bankruptcy in Iowa (2026): Exemptions & Means Test

Bankruptcy is a federal process, but the property you can keep and the income test you must pass in Iowa are shaped by Iowa law. Iowa has opted out of the federal bankruptcy exemptions, and it is one of a small group of states with an effectively unlimited homestead exemption, subject to acreage limits rather than a dollar cap.

This guide is part of our Bankruptcy by State series. It is general legal information, not legal advice, and the dollar figures below change periodically, so confirm current amounts before relying on them.

Does Iowa use state or federal bankruptcy exemptions?

Federal law lets each state decide whether its residents may choose the federal exemption list in 11 U.S.C. 522(d) or must use the state's own exemptions. Iowa is an opt-out state. Under Iowa Code 627.10, a debtor to whom Iowa law applies on the filing date is not entitled to elect the federal 522(d) exemptions, so Iowa's own exemptions apply. If you recently moved to Iowa, the federal domicile rules in 11 U.S.C. 522(b)(3) can require you to use another state's exemptions for a period, so the applicable list depends on your residency history.

Iowa's unlimited homestead exemption

Iowa's headline feature is its homestead exemption. Under Iowa Code 561.16, the homestead of every person is exempt from judicial sale where there is no special declaration of statute to the contrary. There is no dollar cap, which puts Iowa alongside states like Florida, Texas, and Kansas in allowing filers to protect a high-value home.

The protection is limited by size rather than value. Under Iowa Code 561.2, a homestead within a city plat must not exceed one-half acre, and a homestead outside a city plat must not contain more than 40 acres in the aggregate. Separately, under Iowa Code 561.16, persons who reside together as a single household unit are entitled to claim in the aggregate only one homestead exempt from judicial sale. Property beyond these acreage limits is not covered by the homestead exemption.

The 522(p) cap on recently acquired homesteads

Iowa's unlimited homestead does not override federal bankruptcy law on one point. Under 11 U.S.C. 522(p), a filer cannot exempt more than a set dollar amount of homestead equity acquired during the 1,215 days (about three years and four months) before filing. That federal cap is $214,000 for cases filed on or after April 1, 2025, an amount the courts adjust periodically for inflation. Equity you have held in your Iowa homestead longer than 1,215 days can be protected without a dollar limit, but equity added more recently can be capped. A related rule, 11 U.S.C. 522(o), can reduce the homestead where the equity came from non-exempt assets converted with intent to defraud creditors. Confirm the current 522(p) amount for your filing date.

Motor vehicle, household goods, tools, and wildcard

Iowa's main personal-property exemptions appear in Iowa Code 627.6:

• Motor vehicle: the debtor's interest in one motor vehicle, up to $7,000 (Iowa Code 627.6(9)).
• Household goods and furnishings: wearing apparel, household furnishings, appliances, electronics, and similar items held for personal or family use, up to $7,000 in the aggregate (Iowa Code 627.6(5)).
• Tools of the trade: the proper implements, professional books, or tools of the debtor's trade, up to $10,000 (Iowa Code 627.6(11)).
• Cash and limited wildcard: the debtor's interest, up to $1,000, in cash on hand, bank deposits, or other personal property, whether otherwise exempt or not (Iowa Code 627.6(14)).
• Other protections: Social Security and public benefits, many retirement accounts, accrued wages and tax refunds up to $1,000 in a bankruptcy (Iowa Code 627.6(10)), and certain insurance proceeds are also protected. Iowa garnishment limits and federal law protect a portion of earnings from creditors.

These amounts are set by statute and subject to amendment, so verify current figures before relying on them.

The Chapter 7 means test in Iowa

The means test determines whether your income is low enough to file Chapter 7 without a presumption of abuse. The first step compares your household's current monthly income, annualized, to the median family income for an Iowa household of your size as published by the U.S. Trustee Program (justice.gov/ust). At or below the median, you generally pass the first step; above it, a more detailed calculation of allowed expenses and disposable income applies.

For cases filed on or after April 1, 2026, the U.S. Trustee Program lists Iowa median family income as:

• 1 earner: $67,617
• 2 people: $88,800
• 3 people: $104,133
• 4 people: $126,058
• Add $11,100 for each individual in excess of four.

The U.S. Trustee Program updates these figures periodically, typically about twice a year, so check the current table for your filing date.

Chapter 7 vs. Chapter 13

Chapter 7 is a liquidation: a trustee may sell non-exempt property to pay creditors, and most remaining unsecured debts are discharged, often within a few months. Because Iowa's exemptions, including its unlimited homestead, protect a substantial amount of property, many filers keep everything they own. Chapter 7 suits people with limited income and mostly unsecured debt such as credit cards and medical bills.

Chapter 13 is a reorganization for people with regular income who want to catch up on a mortgage or car loan, or who do not pass the Chapter 7 means test. You repay some or all of what you owe through a court-approved plan lasting three to five years, then receive a discharge of remaining eligible balances.

In both chapters, filing triggers the automatic stay under 11 U.S.C. 362, which immediately halts most collection efforts, including foreclosure sales, repossessions, lawsuits, and wage garnishment, while the case proceeds.

Where you file in Iowa

Iowa is served by two federal bankruptcy districts. You file in the district that covers the county where you have lived for the greater part of the last 180 days:

• U.S. Bankruptcy Court for the Northern District of Iowa (Cedar Rapids, Sioux City, Fort Dodge, Mason City, Dubuque, Waterloo), covering the northern counties.
• U.S. Bankruptcy Court for the Southern District of Iowa (Des Moines, Davenport, Council Bluffs, Ottumwa), covering the southern counties.

What bankruptcy can and cannot do

Most unsecured debts, such as credit cards, medical bills, and personal loans, are dischargeable. Some obligations generally are not, including most student loans, recent income taxes, child support and alimony, and debts from fraud. Before filing, the law requires credit counseling from an approved agency, and a debtor-education course is required before discharge. Bankruptcy has long-term effects on credit and is not the right choice for everyone, so consider consulting a licensed Iowa bankruptcy attorney about your specific situation.