Louisiana Bankruptcy Exemptions

You won’t lose everything if you file for bankruptcy in Louisiana. Louisiana’s bankruptcy exemption laws protect the things you need to work and live. You can learn more about Louisiana’s bankruptcy exemptions by reading on.

Louisiana COVID-19 Exemption

The state of Louisiana is the first to exempt stimulus payments related to COVID-19. The new law protects you from creditors other than those collecting spousal or child support. This law doesn’t apply to increases in unemployment compensation received due to COVID-19, however. La. Rev. Stat. Ann. §13:3881(A)(10).

Louisiana law requires that state bankruptcy exemptions be used because the state has opted out of the federal exemptions. Below is a list of Louisiana’s normal bankruptcy exemptions. However, the amounts listed may be higher if you file bankruptcy as a couple. For more information on filing bankruptcy in Louisiana, contact an attorney.

• Homestead (equity in a dwelling used as a residence)
  • Up to $35,000 on 5 acres in a town/city or 200 acres in a rural area
• Equity in automobile
  • Up to $7,500 in motor vehicle
  • An additional $7,500 for a vehicle that accommodates a disability
• Personal property
  • Household goods and furnishings, major appliances, clothing, family portraits, arms and military accouterments, musical instruments, pets, and some livestock (poultry/fowl, one cow)
  • Up to $5,000 in wedding and engagement rings
  • Cemetery plot and monuments
• Tools of the trade
  • Unlimited professional tools, instruments, or books; can include one gun up to $500 and a utility trailer
• Wages
  • 75% of earned income or no less than 30 times the federal minimum wage
  • Federal earned income tax credit
• Insurance
  • Insurance proceeds for natural disaster
  • Group insurance policy/proceeds
  • Health, accident, or disability proceeds
  • Up to $35,000 in most life insurance proceeds
  • Fraternal benefit society benefits
• Pensions
  • Tax-exempt retirement plans, annuity contracts, and qualified pensions
  • ERISA qualified benefits
  • Gratuitous payments to employees/heirs
• Public benefits
  • Public assistance
  • Crime victims’ compensation
  • Unemployment compensation
  • Workers’ compensation
  • Social security
  • Veterans’ benefits
• Other
  • Property of a minor child

What Is a Bankruptcy Exemption?

An exemption in bankruptcy allows a debtor to keep certain property or assets even after bankruptcy is filed. Exemptions are defined by statute, and exempt property cannot be seized or sold to satisfy the debts of the bankruptcy filer.

Both Chapter 7 and Chapter 13 bankruptcy rely heavily on exemptions:

• Chapter 7: In Chapter 7 bankruptcy, exemptions help determine which property you get to keep after the bankruptcy discharge has been granted. After a bankruptcy, bankruptcy exemptions help you protect your property.
• Chapter 13: In Chapter 13 bankruptcy, exemptions help determine how much you will have to pay to your unsecured creditors, which can mean the difference between getting your plan confirmed and getting knocked out of Chapter 13.

Who Can File a Bankruptcy Exemption?

Bankruptcy exemptions are available to anyone who files for bankruptcy. Exemptions are available for both Chapter 7 and Chapter 13 bankruptcy filings, but the exemptions vary from state to state. Making an inventory of your property and listing each property’s replacement value will help you determine what property you will keep if you file for Chapter 7 bankruptcy.

Next, compare the value to your state’s exemption for that type of property. Do this for each system in Louisiana so you can determine which one allows you to keep your property.

What Is a Bankruptcy Exemption Limit?

Equity in property is subject to an exemption limit, which limits the amount of equity that is exempt. A property’s equity is the difference between its fair market value and the unpaid balance.

The equity value of a house valued at $500,000 with a loan of $450,000 is $50,000. If the state’s homestead exemption is $50,000 or higher, the debtor would not have to liquidate the $50,000 equity to pay off the debts.

Depending on where you live, other factors may influence your limit.

Some states allow couples to double their exemption limits after marriage. It is also possible to increase some exemption amounts by filing with “head of household” status or having several dependents. Some states may be exempt for senior citizens from the homestead, personal property, and other items.

The exemption limit for motor vehicles may also be raised if you have a disability.

Confirming Louisiana’s Bankruptcy Exemptions

Louisiana’s exemption amounts adjust periodically, and additional exemptions are available. To ensure you have the most recent figures, check for any updates at the website of the Louisiana Legislature at www.legis.state.la.us or by consulting with a local bankruptcy lawyer.

What Happens to Nonexempt Property?

Your bankruptcy chapter determines whether you’ll lose or keep the nonexempt property.

Chapter 7 bankruptcy involves selling any property you cannot exempt from and using the proceeds to pay your debts, including credit card balances, personal loans, and utility bills.

Nonexempt property is not lost in Chapter 13 bankruptcy. The value of the nonexempt property will be paid to unsecured creditors through your three- to five-year repayment plan.

Can the Trustee Object to Your Exemptions?

You may lose your property if you don’t exempt it carefully, or you may have to pay for it, depending on the bankruptcy chapter. Avoid these common pitfalls.

Is My Property Automatically Exempt?

Most of the time, you can exempt property you need to maintain your job and household, such as furnishings, clothing, and some equity in a vehicle. You must list the assets you can protect from official bankruptcy on form Schedule C: The Property You Claim as Exempt and file it along with other required paperwork.

Are My Exemptions Being Checked?

It is the bankruptcy trustee’s responsibility to review Schedule C to ensure that the property claimed by you can be protected.

If I Make a Mistake, What Should I Do?

In most cases, trustees will not file an objection unless it is clear that the debtor is trying to hide something from the court – at least not without first trying to resolve the issue. The trustee will probably contact you if there is a minor exemption issue. If the trustee is unsuccessful, they will file an objection with the bankruptcy court. The judge will decide.

For example, the state vehicle exemption won’t adequately protect Mason’s rare, classic car worth $15,000. At least in his mind, Mason believes that the car qualifies as art and exempts it from taxation under his state’s unlimited artwork exemption. In reviewing Schedule C, the trustee disagrees with Mason’s characterization and objects to the exemption. The judge will likely agree with the trustee and rule that the vehicle does not qualify as artwork.

Fraudulent Bankruptcy Filings Should Be Avoided

It is not a good idea to finesse exemptions. You are not only required to provide accurate information on your bankruptcy forms, but purposefully making inaccurate statements could also be considered fraudulent. The maximum penalty for bankruptcy fraud is $250,000, 20 years in prison, or both.

Do I Need a Bankruptcy Lawyer?

Bankruptcy is a complex process; it is important to use the exemptions correctly and file all paperwork correctly.

If you are considering filing for bankruptcy in Louisiana, please consult a Louisiana bankruptcy lawyer for advice and assistance.