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Bankruptcy: Louisiana

Filing bankruptcy in Louisiana aims to achieve two things.  First, it gives honest debtors a chance to overcome crushing debt, and second, creditors may be repaid to the extent that the debtor’s property value or earnings permit. 18,537 bankruptcies were filed in Louisiana in 2010, ranking Louisiana 30th in the country for the number of bankruptcy filings per capita. 38% of Louisiana’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Louisiana

Federal law governs bankruptcy proceedings in Louisiana, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located in:

  • Louisiana Eastern District Court: New Orleans
  • Louisiana Middle District Court: Baton Rouge
  • Louisiana Western District Court: Alexandria, Lake Charles, Monroe, Opelousas, Shreveport

Although federal courts have jurisdiction over bankruptcy proceedings, Louisiana law prohibits petitioners from choosing exemptions found in the U.S. bankruptcy code, permitting only the exemptions provided under Louisiana law. With the counsel of a bankruptcy attorney Louisiana debtors can fully understand what personal property the exemptions permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Louisiana

Chapter 7 bankruptcies in Louisiana are the least common bankruptcy filing.  Chapter 7 is best suited to petitioners without significant assets such as investments or substantial equity in a home, for the reason that a Bankruptcy Trustee may liquidate personal property that isn’t protected by Louisiana’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Louisiana’s Chapter 7 bankruptcy law allows debtors to keep some essential property and the exempt assets are strictly off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Louisiana Bankruptcy Exemptions

Louisiana bankruptcy law designates specific property exemptions that permit debtors to keep certain personal property and assets so they may move forward from bankruptcy as productive members of society.  In real terms, this means the creditors cannot force debtors to sell the shirt off their backs.  Bankruptcy in Louisiana permits petitioners to choose exemptions only from the state list.

Property exemption amounts are subject to change, so it is suggested that individuals or couples considering bankruptcy seek the counsel of a Louisiana bankruptcy attorney and discuss the options open to them.  Louisiana bankruptcy exemptions include:

Louisiana Homestead Exemption

  • Disaster relief insurance proceeds for exempt property
  • $25,000 total: Property you occupy; cannot exceed 5 acres in city or town, 200 acres elsewhere (Husband and wife may not double)
  • Full Value: Property you occupy if debt is result of catastrophic or terminal illness or injury, limit is full value of property as of 1 year prior to filing; cannot exceed 5 acres in city or town, 200 acres elsewhere (Husband and wife may not double)
  • Spouse or child of deceased owner may claim homestead exemption; spouse given home in divorce gets homestead

Louisiana Personal Property Exemption

  • Arms, military accoutrements; bedding; dishes, glassware, utensils, silverware (not sterling); clothing, family portraits, musical instruments; bedroom, living room and dining room furniture; poultry; heating and cooling equipment, refrigerator, freezer, stove, washer and dryer, iron, sewing machine; 1 cow, household pets
  • $5,000 total: Engagement and wedding rings
  • $7,500 total: Equity in a motor vehicle
  • $7,500 total: Equity in a motor vehicle modified for disability
  • Spendthrift trusts
  • Cemetery plot, monuments
  • Disaster relief insurance proceeds for exempt property

Louisiana Tools of the Trade Exemption

  • $500 total: Tools, instruments, books and one firearm, needed to work

Louisiana Wage Garnishment Exemption

  • 75% of disposable weekly earnings or 30 times the federal minimum hourly wage per week, whichever is greater (Low-income debtors may be authorized for more)

Louisiana Public Benefits Exemption

  • Public assistance; Aid to blind, aged, disabled
  • Workers’ and Unemployment compensation
  • Crime victims’ compensation

Louisiana Insurance Exemption

  • Health, accident, or disability proceeds or avails
  • Group insurance policies or proceeds
  • Fraternal benefit society benefits
  • Annuity contract proceeds and avails
  • $35,000 total: Life insurance proceeds or avails; if policy issued within 9 months of filing

Louisiana Pensions and Retirement Savings Exemption

  • ERISA-qualified benefits, including IRAs and Keoghs, if contributions made over 1 year prior to filing for bankruptcy
  • Firefighters, Police officers, Sheriffs
  • Teachers, School employees and Louisiana University employees
  • Judges, District attorneys and Court clerks
  • State employees, Municipal employees, Voting registrars and Assessors
  • Parochial employees
  • Gift or bonus payments from employer to employee or heirs whenever paid

Chapter 13 Bankruptcy, Louisiana

In 2010, 62% of petitioners filed for protection under Chapter 13 bankruptcy in Louisiana.  Filing Chapter 13 bankruptcy in Louisiana initiates a financial restructuring process whereby a court-appointed Trustee negotiates with creditors and implements a 3-5 year repayment plan, using the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in Louisiana keep most – or all – of their property.

How to File Bankruptcy in Louisiana

Eligibility for property exemptions should play a key role in deciding whether to pursue bankruptcy as an answer to one’s financial problems. The goal should be to reach a solution that will protect major assets and discharge debts. Because each bankruptcy case is unique, a Louisiana bankruptcy attorney can counsel debtors and help them understand their financial options regarding Chapter 7 and Chapter 13 bankruptcies.

Bankruptcy Attorney: Louisiana

It is the bankruptcy petitioner’s responsibility to know their rights and obligations as debtors.  A Louisiana bankruptcy attorney can make things easier to understand, particularly in terms of federal laws and exemption systems.  The counsel and support of a Louisiana bankruptcy attorney is valuable to anyone facing the complex and stressful road to personal bankruptcy.