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Louisiana consumer law:
Louisiana bankruptcy law

Of all the areas of law, bankruptcy is probably the most consistent from one state to another. Since bankruptcy relief is under federal law, information about bankruptcy is pretty much the same from one state to another with one large exception: exemptions. When we talk about exemptions, we're talking about the things that you do not lose by declaring bankruptcy. In Louisiana, exempt items would include some very important items, like your IRA savings.

 What does bankruptcy cost?

First of all, it is not free. So, how does a person who owes money to several creditors come up with the cash to go into bankruptcy? Easy –the person stops making payments on debts that will be discharged anyway and applies those savings towards the cost of bankruptcy. It may take several months to save up, but it usually takes several months before creditors actually start filing suit on debts.

Related Topics

Types of bankruptcy. One of the most confusing things about bankruptcy for the debtor considering whether bankruptcy is an option, are the various types of bankruptcy. Actually, once you know a little about the subject, it pretty much becomes immediately obvious which type of bankruptcy is best. There are four kinds of bankruptcy proceedings. They are referred to by the chapter of the federal Bankruptcy Code that describes them.

 
 

Chapter 7  is the most common for consumer debt related problems. That is, the person who has gotten way over his head in debt for consumer type purchases. It is a liquidation proceeding in which the debtor's non-exempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors according to the priorities established in the Bankruptcy Code. Chapter 7 is available to individuals, married couples, corporations and partnerships. Individual debtors get a discharge within 4-6 months of filing the case. If there are assets which are not exempt, the trustee takes control of those assets, sells them and pays creditors as much as the proceeds permit. One of the most attractive features about the type of bankruptcy for the wage earner is that all debt as of the date of filing the bankruptcy are discharged and wages or salaries as of that date belong to the debtor.

Chapter 13  is a repayment plan for individuals with regular income and unsecured debt less than $290,525 and secured debt less than $871,550. The debtor keeps his property and makes regular payments to the Chapter 13 trustee out of future income to pay creditors over time (3-5 years). Repayment in Chapter 13 can range from 10% to 100% depending on the debtor's income and the type of debt. Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Chapter 13 also provides a mechanism for individuals to prevent foreclosures and repossessions, while catching up on their secured debts. To qualify for this type of bankruptcy, you must have income.

Chapter 11  is a reorganization proceeding, typically for corporations or partnerships. Individuals, especially those whose debts exceed the limits of Chapter 13, may file Chapter 11. In Chapter 11, the debtor usually remains in possession of his assets and continues to operate any business, subject to the oversight of the court and the creditors committee. The debtor proposes a plan of reorganization which, upon acceptance by a majority of the creditors, is confirmed by the court and binds both the debtor and the creditors to its terms of repayment. Plans can call for repayment out of future profits, sales of some or all of the assets, or a merger or recapitalization. Chapter 11 bankruptcies are frequently converted to Chapter 7 when it becomes apparent that the restructuring of the business is not working.

Chapter 12  is a simplified reorganization for family farmers, similar to Chapter 13, where the debtor retains his property and pays creditors out of future income.

As you can see, it was probably easier to figure out what type of bankruptcy best fits in with what you may need than you thought. Still, it takes an interview with a bankruptcy lawyer to really understand which type of bankruptcy is best suited to your particular problem.

Alternatives to bankruptcy

Budget and change your lifestyle. To explore non bankruptcy alternatives, create a budget for your realistic, monthly expenditures. Include mortgage and car payments, but exclude all other existing debt service. With the money available each month after paying your current living expenses, can you pay off your existing debts at the current interest rates in 3 years? Forget minimum monthly payments on credit cards. You need to calculate the maximum amount you can afford to pay or the debt will continue to get worse. For online help on budgeting, go to http://www.fool.com/calcs/calculators.htm#budget

Outside help.  If you are not having any luck budgeting and changing your lifestyle on your own, there is help available. You must be careful how you choose help, there are many "services" that have no real intention of doing anything except getting you to re-finance everything with them. This is not a solution, even if the sales pitch about reducing the monthly payments turns out to be true. It is only exchanging your creditors and maybe paying less in interest. True help will combine a plan keyed to your lifestyle together with a reduction of debt. In some cases, you may even be able to reduce the debt itself. There are various debtor counseling services and we would not be comfortable recommending any in particular. Do a search on the Internet under such things as "consumer credit counseling" to see what you come up with. Expect to pay a fee for the services keyed to your income. You should be especially careful that in making a plan, that you don't turn exempt debt into non-exempt debt. In other words, it might be tempting to use IRA or 401(k) assets to pay down debt. However, this needs careful thought since if you end up going bankrupt anyway, these assets which would have been exempt are now depleted.

For books about bankruptcy, go to Bankruptcy for a complete listing of books from how to file your own bankruptcy to recovering your credit after filing for bankruptcy.

 The filing fees for bankruptcy are between $185 and $200 depending on what type of bankruptcy you are filing. Most of the cost of bankruptcy is the attorney's fees you will spend for someone to represent you. We do not recommend that you even consider representing yourself. Bankruptcy can be much more complex that it may appear on the surface. Any mistakes can lead to some very unfortunate results, even to criminal charges.

Attorney's fees in a bankruptcy must be approved by the bankruptcy judge. For consumer type bankruptcy, like a Chapter 7, the fee will be pretty much determined up front since everyone knows what the judge will end up approving. With some variations from one court to another, you can count on $500 as a starting point for consumer bankruptcies in addition to the filing fee. In a Chapter 11 business bankruptcy, fees are usually paid on an hourly basis. Again, the amount has to be approved by a judge. The more complex the case, the more the fees will be. These fees are usually paid as they are incurred and as they are approved.


Avoid credit repair scams

Do not be tempted by any service that claims it can fix or repair your credit record. There is nothing they can do that you cannot do for yourself. As the Federal Trade Commission says:

"No one can legally remove accurate and timely negative information from a credit report. But the law does allow you to request a reinvestigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act: You are entitled to a free copy of your credit report if you've been denied credit, insurance or employment within the last 60 days. If your application for credit, insurance, or employment is denied because of information supplied by a credit bureau, the company you applied to must provide you with that credit bureau's name, address, and telephone number. You can dispute mistakes or outdated items for free. Ask the credit reporting agency for a dispute form or submit your dispute in writing, along with any supporting documentation. Do not send them original documents." For more, go to the FTC website.