Louisiana Bankruptcy Law and Chapter 7 Dischargeable Debts
Louisiana bankruptcy law provides individuals and businesses facing financial difficulties with a pathway to regain financial stability. One of the most common types of bankruptcy filed by individuals is Chapter 7 bankruptcy. This legal process allows debtors to discharge certain types of debts, providing a fresh start from overwhelming financial obligations.
Under Louisiana bankruptcy law, Chapter 7 is often referred to as “liquidation bankruptcy” because it allows for the discharge of unsecured debts after the debtor’s non-exempt assets are sold to pay creditors. However, many individuals may wonder, what debts are dischargeable in Chapter 7 bankruptcy? Understanding the dischargeable debts can help individuals make informed decisions about filing.
Dischargeable debts in Louisiana under Chapter 7 include:
- Credit Card Debt: Unsecured credit card debts are typically discharged, allowing individuals to eliminate a significant portion of their financial obligations.
- Medical Bills: Unpaid medical expenses are also dischargeable, providing relief for those burdened by high healthcare costs.
- Personal Loans: Unsecured personal loans—those without collateral—can be discharged, helping individuals regain financial autonomy.
- Debt from Lawsuits: If an individual has judgments against them from lawsuits, those debts can often be discharged in Chapter 7 bankruptcy.
However, not all debts are dischargeable. It is crucial for individuals considering bankruptcy to understand the types of debts that cannot be eliminated through Chapter 7:
- Student Loans: Generally, student loans are not dischargeable unless the debtor can prove undue hardship, which is a challenging standard to meet.
- Child Support and Alimony: Obligations to pay child support or spousal support cannot be discharged in bankruptcy.
- Tax Debts: Certain tax debts, especially recent ones, may not be dischargeable under Chapter 7.
- Debts Incurred Through Fraud: Any debts that resulted from fraudulent activity or intentional wrongdoing are typically non-dischargeable.
In Louisiana, filers must also meet specific eligibility requirements for Chapter 7 bankruptcy. This includes passing the means test, which evaluates the individual’s income and expenses to determine if they qualify for Chapter 7 over other bankruptcy options, such as Chapter 13.
Once a Chapter 7 bankruptcy is filed, an automatic stay goes into effect, preventing creditors from collection actions while the bankruptcy process is underway. After the bankruptcy discharge, which usually occurs within a few months, individuals can start to rebuild their credit and make brighter financial plans.
For anyone contemplating filing for bankruptcy in Louisiana, consulting with a qualified bankruptcy attorney is essential. They can provide guidance tailored to individual circumstances, ensuring a clearer understanding of rights and obligations under Louisiana bankruptcy law.
Understanding Chapter 7 dischargeable debts and the implications of bankruptcy can empower individuals in Louisiana to navigate their financial struggles more effectively, paving the way for a healthier financial future.