This is more of an Iowa family law question, since the bankruptcy would remove the husband's liability from the house. The house debt can be discharged.
The question is really whether the ex has recourse in Iowa family court to go back and get a sanction against him for breaching the decree (which I would actually say is against federal law, but I have heard of it happening here). That section of the decree should be invalidated.
Clark County, Nevada practitioner.
You wrote, "My husband's ex wife is still on the loan to our home, however she was held harmless in the decree .... It also states in the decree that he cannot file bankruptcy to include the home."
A: Federal law trumps the state court decree: he can file bankruptcy; however, he must list the asset (if any portion of it remains in his ownership), the debt and his Statement of Intention re surrender, redemption or surrender.
Your husband can file Chapter 7 and discharge his obligation to the lender. If he stops making payments on the loan and allows it to go into foreclosure, that may violated his divorce decree, so you will need to consult with a family law attorney regarding that issue. If the ex-wife remains liable on the loan from the creditor's standpoint, the defaul in payments and foreclosure will affect her credit, regardless of what the divorce decree states.
Divorce Dividing debts in a divorce Divorce decree Divorce and bankruptcy Divorce and foreclosure Bankruptcy Chapter 7 bankruptcy Credit Debt Debt discharge Bankruptcy and debt Divorce and family Real estate finances Foreclosure Short sales Real estate and bankruptcy Real estate Family law Spousal debt Mortgage debt Domestic relationships Marriage State court