Bankruptcy Laws In Louisiana
The bankruptcy laws in Louisiana are the same as in any other state in the United States. However, where they do differ is with the exemptions laws which will be explained in detail below.
Filing for bankruptcy is an opportunity for people who are facing financial hardship to wipe out some or all of their unsecured debts. These can include credit cards debts and medical bills. When it comes to bankruptcy in Louisiana you generally have two options which are chapter 7 and chapter 13. These options are explained below:
Chapter 7 Bankruptcy in Louisiana
Chapter 7 is the most common bankruptcy to file. With this option the debtor is able to eliminate all or most of their unsecured debts and start a fresh. Unsecured debts can mean credit card debts and medical bills. Using chapter 7 can be a quick and efficient way of achieving debt relief. Certain cases can be discharged within a few months from the date the petition was filed.
Chapter 7 bankruptcy is an option for those people who facing serious debts problems where they do not have enough income to service their debts. This can happen when people lose their job, their health or through a divorce. Under the bankruptcy process people who are facing debts they cannot pay are protected from creditors who want their money back. In this way, bankruptcy provides people with a legal way out from their burden of debt.
With serious debt problems a persons assets can be put at risk however, through chapter 7 certain assets can be protected through the Louisiana exemptions laws. It is important to point out that not all assets are protected from all types of debts under Chapter 7. These non protected debts can include child support payments and tax liens. Also, if you have a mortgage on a property and you are unable to make the payments then, that property could be repossessed by creditors.
Chapter 13 Bankruptcy Laws In Louisiana
Chapter 13 is a repayment plan that can last between 3 to 5 years. Chapter 13 is for people who have fallen behind on secured debt such as a mortgage. However, rather than lose their house to foreclosure the debtor enters into an agreement to pay the arrears through a repayment plan in order to catch up with their payments.
For chapter 13 to work successfully the debtor needs to be disciplined and budget effectively. Not only will they have to pay the arrears they also have to pay the current monthly instalments. So, in fact there are two payments to be made. During the case a bankruptcy trustee will be assigned to administer the repayments.
If the debtor fails to meet the required payments terms they could lose their house or else have the option of transferring their debts to a chapter 7 bankruptcy.
Bankruptcy Means Test
In October of 2005 a new federal law was passed to introduce a means test to qualify individuals for either chapter 7 or 13. The means test takes into consideration your financial situation and in particular your disposable income and the type of debts you have.
The bankruptcy laws in Louisiana state that to qualify for chapter 7 a persons annual disposable income must fall below the median income of a same size family in Louisiana. For example, the median income level for a family with 5 members in the household is $74,739.
Therefore, to qualify a same size family should have the same or a lower annual salary amount to pass the means test. If their income surpasses that limit it does not automatically mean they will not qualify. Even if a person exceeds the limit they can still qualify if they can identify any deductible taxes and expenses to bring their income levels down.
If the income still exceeds the income limit their is still the option to apply for a chapter 13. With this form of bankruptcy evaluation procedure it is advisable to seek the help of a Louisiana bankruptcy law firm or attorney to help guide you through this complex process.
Bankruptcy Property Exemptions In Louisiana
Exemptions are properties/assets that you can keep when you declare bankruptcy. This means they are protected and creditors cannot get their hands on them. Under the bankruptcy code the bankruptcy court of Louisiana must provide an element of care to a person who is to file for bankruptcy by ensuring they are not left destitute.
It is important to reiterate that Louisiana bankruptcy exemptions do not protect the debtor from losing their property if that property is being used as collateral for a secured debt such as a mortgage. However, as long as the debtor is able to pay the mortgage throughout the duration of the bankruptcy process they can keep the house. When they fail to make payments their real estate is at risk of being repossessed. This condition is also applicable to a car loan where the vehicle is being use to secure the loan.
Under the bankruptcy code certain states have the choice of using either Federal exemptions or their own state exemption laws. However, for Louisiana only the states exemptions apply. The following is a list of the most important exemptions.
This exemption protects the equity in a residential property such as the home. Certain state law provide unlimited protection on homes however, most have a set limit exemption amount. For the state of Louisiana the exemption limit is up to $25,000. Home exemptions also acreage limits and for Louisiana these must not exceed more than five acres in city/town or two hundred acres elsewhere.
In certain states the exemption amount can be doubled if for a couple. Unfortunately, this does not apply in Louisiana.
To qualify for the Louisiana homestead exemption you need to have lived in the state for a minimum of 40 months.
The state protects up to $7500 on a motor vehicle and the same protection applies to a vehicle that has been adapted for a disabled person.
These exemptions can include wedding or engagement rings up to $5000 and house hold goods consisting of the following:
- bedding
- silverware
- household furniture
- musical instruments
- pets
- family portraits
- books
- fridge's and freezers
- clothing
These exemptions relate to tools that use in your profession. For example, if you are a professional musician who plays the trombone then that instrument can be made exempt up to a limit of $500.
Bankruptcy information in Louisiana advices that wild card exemptions can be applied. These are useful to have if existing exemptions are not sufficient in protecting your equity. These wild card exemption can be applied to most properties.
Contact a Louisiana bankruptcy attorney at law who is well versed in the bankruptcy exemptions in Louisiana to give you a full account of all the states exemptions and advise you on which ones are applicable to your situation.
Although personal bankruptcy can offer you a fresh start by providing you with much needed debt relief from your creditors it should not be entered into lightly. Bankruptcy has many long lasting consequences that will affect and limit your ability to borrow in the future. It can damage your credit score and remain on your credit report for up to 10 years.
There are bankruptcy alternatives that should be looked at first such as debt settlement and debt management programs. Only when these are used and failed should bankruptcy be considered. You have the rights to represent yourself but due to the complexities of the law it is better to consider the help an attorney who is qualified and knowledgeable of the local laws. There is a diverse range of bankruptcy lawyers in Louisiana to choose from that help you with your case.
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