As a Louisiana resident, you may wonder which debts can disappear after bankruptcy and which ones may remain. Understanding the difference can help you set realistic expectations and plan your next financial steps more carefully.
Comparing Chapter 7 and Chapter 13
Chapter 7 generally focuses on wiping out many unsecured debts, while Chapter 13 tends to reorganize debts and repay them over three to five years. In both types of bankruptcy, certain obligations often remain, regardless of the repayment plan or liquidation approved by the court.
Wiping out debts in Chapter 7
In a typical Louisiana Chapter 7 case, you may be able to eliminate many common consumer debts, meaning you would no longer have a legal duty to pay them. These usually involve unsecured bills that are not tied to property. Examples may include:
- Credit card balances, including interest and late fees
- Medical bills from hospitals, clinics or emergency care
- Unsecured personal loans and many payday loans
- Past-due utility or phone bills
Secured debts, such as auto loans or mortgages, may not disappear completely. Chapter 7 could remove your personal liability, but lenders may still have the right to repossess or foreclose if you do not keep up with payments.
Managing debts in Chapter 13
Chapter 13 often works more like a court-supervised repayment plan. You may need to repay a portion of unsecured debts that Chapter 7 could eliminate entirely. At the end of the plan, the court may discharge any remaining eligible balance.
Priority debts and secured debts typically receive special attention in Chapter 13. For instance, you might use Chapter 13 to catch up on missed mortgage or car payments while spreading other obligations over several years.
Identifying debts that remain
Some debts usually survive bankruptcy because public policy encourages repayment. These tend to be similar in both Chapter 7 and Chapter 13, though how you pay them can differ. In Louisiana, examples can include:
- Child support and alimony
- Most recent federal and state income taxes
- Many student loans, unless undue hardship is found
- Criminal fines, restitution and certain court penalties
Certain older tax debts or other obligations qualify for discharge when specific rules apply, though each case usually requires careful review. Debts tied to fraud or intentional injury may also remain if a creditor objects and the court agrees. The law generally does not allow people to discharge debts resulting from death or injury caused by driving while intoxicated.
Considering your options
Because each situation depends on individual circumstances, carefully reviewing debts before filing helps clarify which obligations may be eliminated and which remain. Understanding these distinctions may support better bankruptcy planning and help you decide on the approach that fits your needs.