How to File for Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy can provide a fresh start for individuals struggling with overwhelming debt. For those living in Louisiana, the process of filing Chapter 7 bankruptcy involves specific steps and requirements that differ somewhat from other states.
If you’re located in Baton Rouge, Louisiana, the Hoke Law Firm is happy to assist you in understanding your options and how to handle this process. We’re here to walk you through the basic procedures, provide helpful tips, and explain how the law works in Louisiana.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a legal process that allows individuals to discharge most of their unsecured debts, such as credit card balances, medical bills, and personal loans. Under Chapter 7, a bankruptcy trustee will oversee the liquidation of non-exempt assets to pay creditors.
However, many filers don’t have assets that are subject to liquidation due to exemptions under Louisiana law. The primary benefit of Chapter 7 bankruptcy is the potential to eliminate debt and start over financially. Before deciding on this path, you must first determine if you’re eligible for it.
Eligibility for Chapter 7 Bankruptcy
Not everyone qualifies for Chapter 7 bankruptcy. In Louisiana, eligibility is based on income, expenses, and the "means test." The means test determines whether your income is low enough to qualify for Chapter 7, or if you may need to file for Chapter 13 bankruptcy instead.
Income limits: The first step in determining eligibility is comparing your household income to the median income in Louisiana for your household size. If your income is below the median, you may qualify for Chapter 7. If your income exceeds the median, you'll need to complete a more detailed analysis of your financial situation.
The means test: If your income is above the median, you'll need to pass the means test. This test evaluates your disposable income after deducting allowed expenses. If your disposable income is low enough, you may still qualify for Chapter 7 bankruptcy. If not, you'll need to file for Chapter 13.
How to Begin the Process
Filing for Chapter 7 bankruptcy in Louisiana starts with preparing a detailed petition. It’s a multi-step process that requires you to provide an extensive list of personal and financial information. Here’s how you can get started:
Complete Credit Counseling
Before filing, you must complete a credit counseling course from an approved provider. The counseling should take place within 180 days before you file your petition and typically lasts about 60 to 90 minutes, according to the United States Courts.
The purpose of the course is to evaluate your financial situation and explore alternatives to bankruptcy. You’ll receive a certificate upon completion, which you must file with the court.
Collect Necessary Documents
You’ll need to gather a wide range of documents for your bankruptcy petition. These documents will give the court a clear picture of your financial situation. Commonly required documents include:
Proof of income (pay stubs, tax returns, etc.)
A list of all debts (credit card statements, loan documents, etc.)
A list of all assets (property deeds, car titles, etc.)
Recent bank statements
A list of monthly expenses
Any other relevant financial documents
Fill Out the Bankruptcy Forms
The bankruptcy forms required in Louisiana include a petition, schedules, and a statement of financial affairs. These forms will request information about your income, debts, assets, and expenses.
Accuracy is crucial, as any discrepancies may result in delays or the dismissal of your case. It’s strongly recommended to seek legal assistance at this stage to check that everything is filed properly.
File the Petition With the Court
Once you’ve completed the forms, you’ll file them with the U.S. Bankruptcy Court for the Western, Eastern, or Middle District of Louisiana, depending on where you live. You’ll also need to pay the filing fee, which is typically around $335 (as of 2024). There may be additional fees for other services during the bankruptcy process.
What Happens After You File?
After filing your Chapter 7 petition, a few key events will take place:
Automatic stay: As soon as your petition is filed, an automatic stay goes into effect. This means that most creditors are prohibited from pursuing collection actions against you, including garnishments, foreclosure, and lawsuits. The automatic stay provides immediate relief and gives you time to go through the bankruptcy process without the constant pressure from creditors.
The trustee appointment: The court will appoint a bankruptcy trustee to review your case. The trustee is responsible for overseeing the liquidation of your non-exempt assets and distributing the proceeds to your creditors. They may request additional documentation or even require you to attend a meeting of creditors.
Meeting of creditors (341 hearing): Approximately 20 to 40 days after filing, you’ll be required to attend a meeting of creditors, also known as a 341 hearing. This meeting is conducted by the trustee and gives creditors the chance to ask questions about your financial situation. However, creditors rarely attend, and the trustee usually asks the questions. You’ll be asked to swear under oath and confirm the information in your bankruptcy petition is accurate.
Exemptions Under Louisiana Law
Louisiana offers a list of exemptions that protect certain assets from being sold during a Chapter 7 bankruptcy. Exemptions are important because they determine which assets you can keep. Louisiana exemptions generally allow you to keep the following:
Homestead exemption: Louisiana provides an exemption for your primary residence, so long as the equity in the home doesn’t exceed a certain limit. The exemption amount can vary depending on factors such as whether you’re married or single, and whether the property is in your name only or jointly owned.
Vehicle exemption: You may be able to keep one vehicle with a certain amount of equity (depending on its value). For example, a single filer may be able to exempt up to $7,500 in equity in one vehicle.
Personal property: Personal belongings such as clothing, household goods, and jewelry may be exempt from liquidation, up to a specific value limit. Louisiana law allows for the exemption of personal property, but the amount is limited.
Wages: In some cases, you may be able to exempt wages earned before you file for bankruptcy.
Tools of trade: If you’re self-employed, you may be able to exempt tools or equipment you use in your trade, up to a certain value.
It’s important to note that Louisiana doesn’t allow you to use federal exemptions, so you must use the state exemptions. An attorney can help you understand how these exemptions apply to your situation. If everything goes according to plan and there are no issues with your bankruptcy petition or assets, the bankruptcy court will grant a discharge of your debts.
Discharge of Debts
This discharge eliminates your personal liability for most of the unsecured debts listed in your petition. The discharge typically occurs about 3 to 6 months after you file your petition. However, certain debts are not dischargeable in Chapter 7 bankruptcy, including:
Child support and alimony
Student loans (except in cases of undue hardship)
Taxes owed to the IRS
Debts incurred through fraud
What Comes Next?
Once your debts are discharged, you can begin rebuilding your financial life. While your credit score may take a hit from filing for Chapter 7 bankruptcy, the discharge provides relief from the burden of unmanageable debt. In the months and years following your bankruptcy, you can start re-establishing credit and setting new financial goals.
If you’ve filed for Chapter 7 bankruptcy in Louisiana, you may find it helpful to seek out credit counseling after your case is complete. Many nonprofit agencies offer financial management courses designed to help people manage their finances more effectively.
Filing for Chapter 7 bankruptcy in Louisiana is a structured process that can offer significant financial relief for individuals overwhelmed by debt. It allows for the discharge of unsecured debts, but it also requires careful preparation and adherence to specific legal procedures.
From completing credit counseling to meeting with the trustee and dealing with exemptions, each step plays a role in securing a successful outcome. While it may seem overwhelming at first, Chapter 7 bankruptcy can provide a fresh financial start for those who qualify.
If you‘re considering bankruptcy, consulting with a Louisiana bankruptcy attorney can help you traverse the process and make informed decisions about your financial future.
Reach Out to Our Firm Today
We provide comprehensive legal services to clients in Baton Rouge, Louisiana, as well as the neighboring areas of New Orleans and Lafayette. Schedule a consultation with the Hoke Law Firm today to get connected with a Chapter 7 bankruptcy attorney you can depend on.