What Happens to Your Home in Bankruptcy in Louisiana

Bankruptcy can be a daunting process, especially when it involves your home. Understanding what happens to your property during bankruptcy proceedings in Louisiana is crucial for homeowners facing financial difficulties. In this article, we will explore the implications of bankruptcy on your home, including exemptions and potential outcomes.

In Louisiana, filing for bankruptcy can be categorized into two primary types: Chapter 7 and Chapter 13. Each type has its distinct impact on your home.

Chapter 7 Bankruptcy

Chapter 7 is often referred to as liquidation bankruptcy. If you file for Chapter 7, the bankruptcy court may sell non-exempt assets to pay creditors. However, Louisiana has specific exemptions that can protect your home. Louisiana's homestead exemption allows you to protect a certain value of your primary residence from being sold. As of 2023, the exemption amount is generally up to $35,000 per individual or up to $70,000 for a married couple filing jointly. This means if the equity in your home is below this threshold, you can keep your home.

If your home’s equity exceeds the exemption limit, the bankruptcy trustee may sell your home to pay creditors. However, this decision can often be avoided through various means, such as reaffirming your mortgage or negotiating with creditors.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, is often referred to as a reorganization bankruptcy. This allows individuals to create a repayment plan to pay off their debts over three to five years while retaining their assets, including their homes. If you are behind on your mortgage payments, Chapter 13 can help you catch up on those payments by incorporating them into your repayment plan.

In Chapter 13, your home is generally protected from foreclosure as long as you make your plan payments on time. This creates a structured way to reorganize your finances and avoid losing your home. However, it’s essential to stay current on your ongoing mortgage payments to prevent any complications.

What If You Are Facing Foreclosure?

If foreclosure proceedings have already started against your home, bankruptcy may offer a remedy. Filing for bankruptcy can automatically stop foreclosure through what is known as an "automatic stay." This gives you some breathing room to negotiate with your lender or file for Chapter 13 bankruptcy to save your home.

Post-Bankruptcy Considerations

After your bankruptcy case is resolved, the impact on your credit score will vary based on the type of bankruptcy filed. Chapter 7 stays on your credit report for ten years, while Chapter 13 stays for seven years. Regardless of the type, it is crucial to start rebuilding your credit following bankruptcy.

In conclusion, the fate of your home during bankruptcy in Louisiana largely depends on the type of bankruptcy you choose and the equity in your property. Understanding your options and possible exemptions can help you navigate this challenging situation. Consulting with a qualified bankruptcy attorney can provide tailored guidance to protect your home and secure your financial future.