Bankruptcy and debt relief in Louisiana
It is an unfortunate reality of modern life that people find themselves overwhelmed with the stress of debts they have no way of paying back through no fault of their own.
Significant medical complications, loss of income, extended periods of unemployment, or business deals have gone wrong can all work to place a family in dire financial circumstances.
In addition, the growth and use of modern technology now often results in endless harassing calls from collection agencies who seem to have you on speed dial.
Fortunately, the law allows a fresh start under the laws of bankruptcy.
Initiating the bankruptcy and debt relief process in Louisiana is a significant decision.
The applicable laws and rules are full of exceptions and exemptions that can often be confusing.
You should select an experienced and knowledgeable bankruptcy attorney to guide you through the process.
The bankruptcy attorneys of the BFH Law Group in New Orleans, Louisiana have complied with this guide and list of our most frequently asked questions for your review.
Important Bankruptcy Statistics to Consider
- Each year there are around one million bankruptcy filings in the United States.
- Around 3,000 people in New Orleans file for bankruptcy annually.
- On average, around 63% of all bankruptcy filings nationwide are under Chapter 7 – personal liquidation.
- The most common two causes of bankruptcy are income loss and medical debt.
Filing for Bankruptcy in New Orleans
Chapter 7 vs. Filing Chapter 13: Comparing Two Most Common Types of Bankruptcy
Most consumers facing a bankruptcy decision in Louisiana will benefit from a brief comparison of Chapter 7 and Chapter 13 options.
Each type of bankruptcy is subject to its own rules governing how the bankruptcy works.
The goal for a debtor in any bankruptcy proceeding will to legally discharge the payment obligation associated with their debts.
Chapter 7 is known as liquidation bankruptcy.
A Chapter 7 debtor who completes the process will no longer owe creditors whose debts were included and discharged in the bankruptcy process.
There is no requirement to make payments during the bankruptcy matter; in fact, doing so is disallowed.
The process to go from filing chapter 7 to discharge can in typical circumstances be completed in a matter of months.
Chapter 13 is also known as a reorganization bankruptcy. After filing a Chapter 13 bankruptcy, the courts assign the case a Bankruptcy trustee who is tasked with collecting money from the debtor and redistributing those funds to creditors with claims according to a repayment plan.
Those payment amounts will almost always be much less than the monthly payments the debtor made prior to the filing of chapter 13, and represent the creditor’s new payment arrangement during the bankruptcy process.
A Chapter 13 repayment plan generally must run three to five years before discharge. Should the debtor fail to meet the terms of the Chapter 13 repayment plan, the debtor’s bankruptcy case, the protection from the collection, and the reduced payment options provided by the plan will be canceled.
Both Chapter 7 and Chapter 13 prohibit collection activities by a creditor during the bankruptcy matter.
What is the difference between debt relief and debt consolidation?
They are not the same.
Debt consolidation involves working with a creditor or third-party group to combine your monthly bills and expenses and may lower some interest or other amounts, but the ultimate goal is to ensure that the creditor still gets paid.
In contrast, our Louisiana bankruptcy attorneys use debt relief and bankruptcy essentially interchangeably.
By complying with the bankruptcy process, the debtor is relieved from the responsibility of paying the debt going forward, as it has been discharged by completing the bankruptcy process.
How much does it cost to file bankruptcy?
The fees to file bankruptcy in Louisiana are defined by the federal court system.
As of April 2020, the cost to file Chapter 7 Bankruptcy in New Orleans and Baton Rouge is $335.00.
The cost to file Chapter 13 Bankruptcy in New Orleans and Baton Rouge is $310.00.
These costs are always subject to change.
Scheduling a free consultation with a Louisiana bankruptcy lawyer is the best way to ensure that you are fully informed and up to date.
What happens after I file bankruptcy?
Once a creditor is notified of the filing of bankruptcy, they are automatically prohibited by law from taking further collection actions.
This automatic stay on collection actions includes preventing harassing phone calls and letters and is often the most notable change for consumer bankruptcy clients after filing bankruptcy.
There are severe legal penalties for a creditor who has acted in violation of the automatic stay after a bankruptcy filing, including fines, sanctions, and attorney’s fees.
Do you have to go to court for Chapter 7?
Yes, at a minimum any debtors or co-debtors will be required to attend at least one meeting with the assigned bankruptcy trustee to be assigned at a date and time provided by the Court.
Failure to attend this meeting without good cause can result in the case being dismissed and often results in a judge ruling that the debtor is prohibited from utilizing the bankruptcy process again for a period of time.
Beyond the minimum required in-person meeting, since 2009 the law has required that all Chapter 7 debtors must attend two financially themed courses before obtaining a discharge.
These mandatory debtor education courses may be completed online, in person, or via telephone.
Our Louisiana bankruptcy attorneys have experience with managing these processes and can guide you to a low cost and accessible option that meets your needs.
Of course, any court-ordered hearings or adversary proceeding will also result in a scheduled court date which you or your Louisiana bankruptcy attorney must be prepared to attend.
Can I file bankruptcy more than once?
There are no limitations to how often you may file, but since the goal is to obtain a discharge, there are very important limitations that must be considered.
If you previously received a Chapter 7 discharge, you must wait eight years between the first Chapter 7 filing date and the new filing date.
If you want to receive a discharge in Chapter 13 after previously filing for Chapter 13, you must allow two years to pass between the two filing dates.
Note that Chapter 13 repayment plans take three to five years to complete, meaning the two-year “limitation” typically results in ineligibility for a second discharge immediately after completing the first one.
If your initial discharge was under a Chapter 7, you’d be eligible for a new Chapter 13 discharge four years after filing the initial Chapter 7.
In addition to these general rules, judges have the authority to prohibit a debtor from filing bankruptcy for bad behavior or prior bad acts in a previous bankruptcy matter such as failing to adhere to a court order.
Schedule a free consultation with a Louisiana bankruptcy attorney to review the specifics of your situation and your available options.
What cannot be discharged in bankruptcy?
While most debts are bankruptcy eligible and should be canceled following the completion of the bankruptcy process, the law does provide a limited category of debts that debtors cannot discharge in bankruptcy.
In our experience the consumer debts most often challenged as non-dischargeable include:
- Debts owed by the debtor and not reported or listed in the bankruptcy case
- Family or domestic support obligations, such as child support or spousal support/alimony from a previous divorce
- Fraudulent or intentional acts causing injury to another
- Injuries to others resulting from driving or otherwise operating a vehicle under the influence of alcohol or drugs (e.g. An injury caused during a DWI indecent)
- Dues or fees owed to a homeowner’s association
- Taxes owed to a government entity, including a state or federal revenue service
- Most student loans and other educational loans, absent a finding of “undue hardship”
This list is not intended to be exhaustive. There are always exceptions to every rule; the best approach is to evaluate each potential matter on a case-by-case basis.
If you have questions about whether your debt can be discharged, schedule your free consultation with an experienced New Orleans bankruptcy attorney today.
Can student loans be discharged through bankruptcy?
The discharge of student loans in bankruptcy is one of the most hotly debated areas of bankruptcy law and generally depends on if requiring the debtor to retain the debt will amount in an “undue hardship.”
With the proliferation of online colleges and universities, the definition of “undue hardship” itself is always evolving and varies between different courts, judges, states, and the circumstances of the claimed debtor and creditor(s).
While the “undue hardship” limitation makes discharging student loans through bankruptcy admittedly difficult, contrary to popular belief it is not impossible.
Of course, having the assistance of an experienced attorney will greatly improve your odds and at minimum give you an informed perspective of how this ever-changing law may apply to you.
Can you include tax debt in Chapter 13?
Tax debts owed to a governmental entity are generally not dischargeable in bankruptcy; in our experience including these items in notices to potential debtors typically result in an objection from the collecting entity or the bankruptcy trustee itself.
One of the most important tasks of a retained bankruptcy attorney is evaluating the debtor’s full financial picture to give an honest assessment of the items that may or may not be eligible for bankruptcy discharge.
Our attorneys have years of experience in assisting consumers just like you successfully complete Louisiana bankruptcies and are available for a free consultation.
Can you keep your tax refund after filing Chapter 7?
It depends on the source and amount of the refund.
In general, a tax refund results from overpayment of the imposed tax and shall be repaid to the taxpayer.
However, after filing bankruptcy the debtor is required turnover to the assigned Bankruptcy trustee any assets acquired after the petition as the property of the bankruptcy estate; the general idea is while the debtor previously claimed that there was insufficient money to pay his or her bills, this newly acquired money could, in theory, be used for that purpose.
Thus, if the refund is paid during the bankruptcy matter, some portion of if it may be recoverable by the Bankruptcy trustee, but not necessarily ALL of it.
All tax refunds are not the same; while some refunds may be wholly or partially attributable to applying the prior year’s credits and remain the debtor’s money, others are a matter of a debtor who overpaid based on their previous year income.
A general rule is that, where a debtor has little to no income in the prior tax year, they will be less likely to be required to forfeit most or all of their tax refund.
The interaction of numerous tax and bankruptcy law provisions requires the evaluation of an experienced Louisiana bankruptcy attorney on a case by case basis.
Can I keep my COVID-19 stimulus payments after filing Bankruptcy?
Yes, you should be able to. In fact, recent emergency amendments to the bankruptcy code made effective April 24, 2020, indicate that those amounts are not even reportable as “income” for bankruptcy purposes.
National Emergencies Act (50 U.S.C. 1601 et seq.) provides that payments made under the Federal law relating to the nationally declared emergency with respect to the coronavirus disease 2019 (COVID-19) are expressly excluded from the definition of income.
As only monies defined as “income” can be properly classified property of the estate subject to redistribution by the trustee to creditors as part of the bankruptcy process, debtors should feel comfortable in not being penalized for using these federally granted emergency funds as intended without being penalized in the bankruptcy process.
Given the ongoing and rapidly developing nature of the COVID crisis, speaking with an experienced Louisiana bankruptcy attorney is your best option to stay as informed as possible.
Can you keep your house/car/guns/wedding rings etc. after filing bankruptcy?
Yes, in fact, one of the most common ways that bankruptcy petitioners who do not hire an attorney and attempt to self-represent fall short are by failing to maximize the allowable exemptions for assets that could be otherwise protected from sale by the bankruptcy trustee.
While federal law does issue its own classes of exemptions, Louisiana bankruptcy filers must remain solely within the laws provided by Louisiana law.
Since Louisiana is a community property state, married debtors who file jointly can double the available exemption in some circumstances.
Most Common Louisiana Bankruptcy Exemptions and their Limits
- Louisiana Homestead Exemption: Up to $35,000 of the equity in a personal residence can be exempted; married couples filing jointly can double this amount to $70,000.
- Louisiana Vehicle Exemption: Up to $7,500 of the equity in a vehicle can be exempted; married couples filing jointly can double this amount to $15,000 in one vehicle or spread out their individual exemptions to cover multiple vehicles.
- Louisiana Special and Personal property exemptions: In Louisiana, certain household goods, furniture, pets, up to $5,000 in wedding and engagement rings, and up to $2,500 in firearms may be exempted from bankruptcy when properly noticed and reported to the trustee and creditors.
There are many other possible and potential exemptions that may be applicable to allow you to keep a certain valuable personal property.
Additionally, even if there is not an available exemption, an experienced Louisiana bankruptcy attorney can assist you with negotiating a reaffirmation agreement with individual creditors which, if and when approved by the court and trustee, may still allow you to keep those items after filing bankruptcy.
In short, while the technicalities can get a bit complicated, it is possible for you to file bankruptcy and but keep your home and/or file bankruptcy but keep your car.
What is the Louisiana self-help repossession law?
Louisiana allows a creditor with an enforceable interest in a leased or financed automobile the right to obtain possession of the vehicle, including via unannounced repossession, after the debtor defaults by not making payments for two consecutive months or 60 days.
Self-help repossession is limited to methods that do not breach the peace.
This ordinarily means that creditors may not make unauthorized trespass into a home or over the visible oral objections of the debtor or their counsel during the repossession attempt.
Impersonating or dressing a manner that falsely identifies the repossessing agent as a member of law enforcement may also violate the standards of self-help repossession.
What is a notice of seizure or repossession?
In Louisiana, a creditor with an enforceable interest in the property, such as a lien or mortgage holder, will issue a notice of seizure as a necessary step in the process of enforcing those rights.
This is accomplished by providing legal documents to a person of interest (usually the Debtor), often by Certified Mail, or via an authorized third-party like a local sheriff.
In contrast to real estate property, official advance notice of seizure may not be required before collection action to repossess an automobile.
Any notice of seizure outlines necessary dates and required deadlines for response.
If you are concerned about a notice of seizure recently received, or you are falling behind on payments and are concerned about defaulting, you should contact an experienced Louisiana bankruptcy attorney immediately to protect your rights.
Can you repo a car with someone in it?
Ordinarily, repossessing a car while occupied can be contested as a breach of the peace in violation of Louisiana’s rules governing self-help repossessions.
Overaggressive creditors and tow truck agents can cause significant legal issues when they admittedly very creditor-favorable repossession laws are violated.
You also are required to be allowed to gather certain personal property inside the car, or at minimum have that property returned to you.
The specific facts and circumstances of each case should be evaluated by an attorney experienced in Louisiana bankruptcy law.
What are the long-term effects of bankruptcy?
The most obvious long-term effect of bankruptcy is a fresh financial start granted by the removal of the obligation to pay debts that were owed prior to the filing of the suit.
Beyond the direct financial benefits, however, bankruptcy laws also require the debtor to complete a series of financial education which usually proves to be very informative and helps the debtor to avoid serious financial problems again in the future.
How long does bankruptcy stay on your credit report?
Credit reporting agencies list for a chapter 7 bankruptcy for 10 years and a Chapter 13 bankruptcy for 7 Years.
How will bankruptcy affect my credit?
For Chapter 7, the mark associated with the debt included in bankruptcy remains for 10 years.
For Chapter 13 the reporting period is reduced to 7 years.
However, the impacts of those reported items tend to diminish over time and are not all-inclusive.
Debtors may be able to secure new credit shortly after or even during the bankruptcy matter itself, and responsible timely use of credit will report a positive history to the reporting agencies that can offset the perceived negative history of the bankruptcy itself.
A free consultation with an experienced Louisiana bankruptcy attorney is a critical step in developing an all-encompassing financial plan.
The petition for bankruptcy, while often the right choice for many consumers, is only one piece.
How Will Personal Bankruptcy Affect My Business?
Technically, if your personal business is a separate legal entity such as an LLC or corporation, it shouldn’t.
As an independent legal person, a business has a credit history and corporate life separate and apart from the personal history of its owners and can file bankruptcy on its own, if necessary.
A more complicated question would be a business structured as a sole proprietorship or general partnership without a separate legal identity.
An assessment of each potential filer’s financial history, including any associated or related business interests, should only be done by an attorney with experience in business and bankruptcy matters.
Speak With a New Orleans Bankruptcy Attorney Today
We hope this information has helped you better understand the bankruptcy process.
If you are interested in scheduling a free consultation to discuss your options with an attorney, call us at (504) 273-0444.
We are available for your phone call 24/7.