Louisiana residents may find relief from debt through Chapter 7

Many Louisiana residents who seek relief from their financial burdens may find solace from filing for Chapter 7 bankruptcy. More than one million Americans filed for bankruptcy in 2013, and 728,833 of those people chose Chapter 7 as a way to discharge their debt, according to the U.S. Federal Courts. Otherwise known as liquidation bankruptcy, Chapter 7 gives people who are laden with excessive credit card debt, medical expenses and other financial obligations, the hope of a fresh financial start.

Who qualifies for Chapter 7 bankruptcy?

In order to qualify for Chapter 7 bankruptcy, debtors must have an income level that is below the state median. According to the U.S. Department of Justice, the state median in Louisiana for a family of four is $69,899. Yet, people who have an income that exceeds this amount may still qualify. A means test is given to determine how much money an individual or family has after deducting their monthly expenses from their monthly income. If the remaining amount is below a set standard, the individual may still qualify to file for Chapter 7 bankruptcy.

Getting started

The bankruptcy process begins when a person or couple files the proper documentation with the courts. In addition to tax returns, a schedule of income and expenditures and schedules of assets and liabilities, the debtor is required to turn in a certification showing completion of a credit counseling course. Before the process can begin, the debtor must also pay any court filing fees as well.

What is exempt property?

During a Chapter 7 bankruptcy, the appointed case trustee must repossess and liquidate the debtor's non-exempt property. They then distribute the proceeds to unpaid creditors. There are some items, however, that are exempt from repossession. Common items that are exempt include clothing, furnishings, guns, jewelry and other household property that has a value of below a set amount. A debtor may be able to reaffirm their auto loan through their financial institution, which will allow them to keep their vehicle and continue making their loan payments.

Can all debt be discharged?

Debtors should keep in mind that not all debt can be discharged through bankruptcy. According to the U.S. Federal Courts, the following types of debts cannot be discharged in a Chapter 7 bankruptcy:

  • Child support and alimony.
  • Certain tax claims.
  • Fines and penalties owed to government agencies.
  • Any debts incurred from a DUI or any other type of criminal activity.

Speaking with a professional

Although a lawyer is not required for to initiate the bankruptcy process, many people choose to partner with a professional bankruptcy attorney to ensure that all of their documentation is organized and filed correctly. Any mistakes may result in the bankruptcy being denied. An attorney can also help people determine which Chapter of bankruptcy is right for their unique financial situation.