Bankruptcy Debt Options in Louisiana
- To use Chapter 7 bankruptcy as a debt option, a Louisiana debtor must first qualify for this chapter. The debtor compares his family income to the median family income for a family of the same size within the state of Louisiana. If the debtor's family income is below the state median, he can file for Chapter 7.
As of 2010, the Census Bureau listed Louisiana's median incomes as $37,331 for a single earner; $48,115 for a family of two; $53,271 for a family of three; and $62,020 for a family of four. Add $7,500 for each family member in excess of four.
If the debtor's family income is above the state median, he must calculate his monthly disposable income by deducting monthly expenses from his monthly income. If the debtor's monthly disposable income is less than $100, he can file for Chapter 7. If the debtor's monthly disposable income is more than $100, but that amount would not pay at least 25 percent of the debts over the next 60 months, the debtor can file for Chapter 7.
- If the debtor's monthly disposable income is more than $100, and that amount would pay 25 percent of the debts over the next 60 months, the debtor cannot file for Chapter 7 bankruptcy. If the debtor wants to file for bankruptcy, she must file for Chapter 13 and propose a debt repayment plan. The means test determines the length of the repayment plan. If her family income is below the Louisiana median, she will spend the next three years repaying her debts. If her family income is above the Louisiana median, she will spend the next five years repaying her debts.
- In either case, once the debtor files his bankruptcy petition, a bankruptcy trustee will be appointed to the case. In a Chapter 7 case, the trustee must sell the debtor's property to pay a portion of the debtor's creditors. Louisiana has a list of exempt property that cannot be sold. All other property can be sold. After the property has been sold, the debtor will receive a discharge of his debts. If the debtor does not want to have his property sold, he may file for Chapter 13 bankruptcy. In a Chapter 13 case, the debtor must propose a debt repayment plan to be approved by his Louisiana bankruptcy judge. After the plan has been approved, the trustee will accept plan payments and distribute payment to creditors. After all plan payments have been made, the debtor will receive a discharge of his debts.