Bankruptcy Laws and Procedures in Louisiana
Louisiana residents who are faced with a mountain of debts that they are unable to pay off often decide to clear their financial slates and file for bankruptcy. This can be quite helpful when, coupled with credit counseling to assure they don't wind up in the same circumstances later, they begin anew on surer financial footing. Below are some important things to know about the laws governing bankruptcy in Louisiana.
Federal bankruptcy laws changed in October of 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act took effect six months after President Bush signed it into law. This new law requires consumers who file bankruptcy to receive credit counseling in the six months prior to their filing for debt relief. It also mandated their completion of a financial management instructional course.
There was another change to the existing laws under this act. To file for either Chapter 7 or 13 bankruptcy, debtors' finances must now be scrutinized by a means test. This means that debtors' income will be averaged for the six months prior to the filing and then compared to their state's median income. When their income falls below the median, Chapter 7 becomes an option. Those with incomes in excess of the median will be further scrutinized to determine whether they are eligible for Chapter 7 or only for Chapter 13.
In many cases, Chapter 7 remains an option for those who can't pay a minimum of $6,000 over five years to their unsecured creditors once their living expenses are met. This amount is equal to $100 a month. Those with the means to pay a minimum of $10,000 over the same period usually will be denied the right to file Chapter 7. For those falling somewhere in the middle, an additional calculation is applied to determine your eligibility. Chapter 13 remains a viable option even for those who qualify for Chapter 7.
Beginning the Process
It's a bit of a paper chase, because you will need to furnish all of the following:
- Proof of income from all sources
- Monthly living expenses
- All debts, both secured and unsecured
- Proof of all major financial transactions for the two years preceding the bankruptcy filing
- Complete list of all possessions and assets
- Tax returns for the past two years
- All property deeds
- Loan documentation
- Titles to all vehicles
Once you are armed with all of this information, it is time to determine which items are exempt from seizure under Louisiana law.
Louisiana Bankruptcy Exemptions
In addition to any federal exemptions, the state of Louisiana provides specific state exemptions for debtors. Below is a list of the exemptions.
- Homestead -- This applies to occupied property with a value of $35,000 or less that is five acres or fewer in a municipality and may be up to 200 acres elsewhere. Bankruptcies resulting from terminal or catastrophic illnesses or injuries allow the total value of the property to be exempt.
- Group insurance policies, proceeds from accident, health or disability policies and fraternal benefit societies.
- Life insurance policy proceeds up to $35,000 if the policy was issued within nine months of the bankruptcy filing.
- Property belonging to the debtor's minor children.
- Pensions paid to employees or their heirs.
- ERISA benefits if said contributions were made a year or more before date of filing.
- Some personal property.
- Vehicle valued up to $7,500.
- Wedding and engagement rings valued at $5,000 or less.
- Monuments and cemetery plot.
- Public assistance like Temporary Aid to Needy Families (formerly AFDC), funds for the aged, disabled or blind.
- Unemployment and Workers' Compensation benefits.
- Compensation for crime victims.
- Tools of the trade, instruments, books, pickup truck up to three tons, trailer and non-luxury car needed for work.
- A minimum of 75 percent of earned but unpaid income, although the judge may authorize a higher percentage in cases of low-income debtors.
Because the bankruptcy laws and procedures in Louisiana, coupled with the federal regulations, are complicated and failing to follow the rules can jeopardize the outcome of the filing, it is always a good idea to seek qualified legal representation when filing.