With the United States economy suffering through the worst recession its citizens have faced for decades, an ever increasing number of Louisiana consumers have been left with no other choice than to consider the option of bankruptcy. Alas, many of these families have come to realize too late that the Chapter 7 and Chapter 13 bankruptcy programs have been irrevocably altered. Ever since April of 2005, when President Bush formally approved the Bankruptcy Abuse Prevention And Consumer Protection Act, the protections available for Louisiana households and all Americans were utterly weakened. In the years afterwards, it’s been extremely difficult for Louisiana borrowers earning a livable income to even qualify for the Chapter 7 debt elimination program, and, for those borrowers that did qualify, they would be newly at risk of property seizure to repay their past creditors. Furthermore, the BAPCPA legislation expressly made it much rougher for Louisiana families to endure the tight budgets and curtailed spending of Chapter 13 debt reorganization. Bankruptcy protection may still be possible within this new paradigm, your authors wish to make clear. At the same time, Louisiana households that had previously just presumed that Chapter 7 bankruptcy debt elimination would be available to liquidate their towering debt loads as it had for generations must learn quite a bit more about the new practicalities surrounding the bankruptcy program before they first spend the money upon submitting the petition and taking the required debt management classes (not to mention the ridiculous sums charged by experienced Louisiana bankruptcy attorneys given the current ground swell for bankruptcy protection). Within the following paragraphs, we’ll explain a bit more about the actual process of bankruptcy declaration, what the passage of the Bankruptcy Abuse Prevention And Consumer Protection Act means for ordinary Louisiana households, and some of the new alternatives to Chapter 7 and Chapter 13 bankruptcy protection that have risen in status of late.
Of all of the alterations to bankruptcy, the new guidelines for Chapter 7 admission have been perhaps the most destructive. Chapter 7 debt liquidation bankruptcy protection has traditionally been the most popular form of governmental assistance for consumer debts, but, ever since the 2005 BAPCPA legislation, the congressionally defined qualifications for being admitted to the Chapter 7 program has changed dramatically. While Louisiana debtors would formerly only have to convince a trustee appointed by the county judicial system that they would be unable to easily satisfy their debts through normal methods of repayment, modern households, as the United States bankruptcy code now demands, must demonstrably have made less than the median income of their state over a previously determined period of the year prior to filing their bankruptcy petition. Obviously, for borrowers who have seen their income falter during the current economic troubles affecting the nation or even for the many Louisiana debtors who owe more than they could ever pay back (which seems particularly easy these days with the rising costs of medical care and hospitalization and so many Louisiana families losing their health insurance), these new bankruptcy regulations could have dire consequences for the family. This is especially true for those Louisiana households that allowed their debts to climb and fester as they attempted to find some miracle that would allow new earnings or a sudden windfall to satisfy their collected unsecured lenders. Too many Louisiana borrowers let their financial obligations slide as they try to arrange compensation because they remain dimly assured that Chapter 7 bankruptcy protection shall be there in the end only to be crushed as they realize that a governmental safety net no longer exists for all Louisiana residents. This is just one of the reasons that every Louisiana borrower with even a modicum of unsecured consumer debts should take the time to investigate their household’s potential for bankruptcy protection well before they realize the need for assistance will be imminent.
Obviously, the first step for any Louisiana family that believes they may at some point require Chapter 7 debt elimination bankruptcy protection should be to find out specific and timely information about the median income levels of the heads of household in their state. As of the most recent census bureau data at the time of publication of this article, Louisiana households with just one wage earner would have to make less than thirty four thousand dollars. Those households that contain two individuals would have to earn less than forty two thousand dollars. The level’s set at fifty two thousand dollars for families of three, sixty one thousand dollars for families of four, and interested borrowers should add an additional sixty nine hundred dollars for every additional member. Families in Louisiana that make more than this will find it extremely difficult to meet the requirements of Chapter 7 debt elimination bankruptcy though there are still other alternative methods of qualification. Primarily, Louisiana debtors, once they have explored the prior income history of their household as well as the median income levels as recorded by the United States Census about their state and have discovered that they would be unlikely to garner Chapter 7 bankruptcy protection, should look toward the means test now offered by Louisiana court trustees. Within the means test, the court officials will examine the household’s earnings over the past six months and deduct the monthly payments for secured debts (home mortgages and car loans, primarily), governmentally imposed debts (child support, alimony, income and property taxes, and any fines or monetary penalties resulting from criminal or civil trials), and the ordinary day to day costs of living (with school expenses for each child capped at fifteen hundred dollars per annum).
As the end result of this means test, after all of the previously notated amounts have been taken into consideration, if the trustee finds that the Louisiana head or heads of household would still be unable to afford one hundred dollars a month in the service of repaying their creditors for a period of five years – six thousand dollars, over all – then Chapter 7 bankruptcy assistance may still be available for the family. This may initially sound like an easy way for all borrowers to work around the draconian new additions to the new United States Bankruptcy Code, but there are even more unnecessarily harsh guidelines for Louisiana residents seeking debt elimination protection to consider before filing their bankruptcy petition. Unfortunately, the day to day expenses for the family will not come down to the actual figures that the family has to pay out every month. Instead, for the purposes of the Chapter 7 bankruptcy means test, the courts can only utilize the formal living expenses as calculated by the Internal Revenue Service for the average household in Louisiana. As every borrower should readily acknowledge, the mathematics employed by the IRS are often wildly disparate from the genuine realities that Louisiana residents must endure, and, even beyond the distinct needs of so many different family situations, the Internal Revenue Service statistics also fail to take into account how much the costs of living can change around different parts of Louisiana. By averaging figures for the entire state, Louisiana debtors who reside in higher priced urban areas will find their expenses artificially lowered, and, by extension, they will have all the more trouble gaining admission to the Chapter 7 debt elimination bankruptcy program. Worse yet, the powers of leniency formerly granted the trustee charged by the Louisiana judicial system with analyzing the legitimacy of the borrowers’ bankruptcy declaration have been decisively weakened by the new statutes, and, no matter how unfair they may find the IRS guidelines, the local courts now have dramatically limited oversight abilities even in the most unfortunate of circumstances.
Should the Louisiana households actually make their way through the swarm of new regulations to enter Chapter 7 bankruptcy protection and have their formal declaration accepted by the trustee, they’ll find that the bad news continues. Before 2005, borrowers filing for Chapter 7 debt elimination bankruptcy would understand that their household would theoretically be at the mercy of the Louisiana courts that could declare anything deemed to be an asset possibly liable for seizure by county authorities and held over for auction to remunerate the unsecured creditors that saw their debts liquidated through the Chapter 7 process. In practice, however, few Louisiana borrowers would honestly need to worry about property forfeiture because the federal statutes only asked the consumers filing for bankruptcy to declare the worth of their possessions as considered by their potential resale value. Under the current statutes, borrowers filling out their Chapter 7 petitions now must compile a list of all household objects according to their potential replacement value and the difference in aggregate monetary worth can be staggering. While the vast majority of all previous Chapter 7 debt elimination bankruptcy filed in Louisiana were pro forma judged to be no asset cases, virtually every Louisiana household thinking about Chapter 7 bankruptcy protection must now take deathly serious the chances that court agents could enter their home to take necessary goods or even family heirlooms. Furthermore, as with the problems we’ve observed through the inability of Louisiana trustees to interpret the math of the means test, the county court officials will be somewhat helpless to arbiter the forfeiture of what the regulations suppose to be the borrowers’ assets. Even the most prized possessions of a Louisiana family that clearly have far more sentimental than actual value may fall prey to arbitrary decisions made by the bankruptcy trustee.
Providentially, every state in the union has been allowed to develop their own sets of exemptions to augment the virtually non existent federal ones, and the Louisiana legislature has assembled some of the more relatively manageable statutes that borrowers declaring Chapter 7 bankruptcy debt elimination would find anywhere in America. The Louisiana borrowers’ primary residence, for example, should be protected against forfeiture so long as the house is not more than one hundred and sixty acres and that the equity of the house (meaning the current mortgage balance deducted from the price of the house as evaluated by an appraisal done within three months of filing) is less than twenty five thousand dollars. Ironically, given the plummeting real estate values seen around every inch of Louisiana, this should be less of a problem than ever before: one of the rare benefits of our national recession. Similar to the homestead exemption, motor vehicles worth less than seventy five hundred dollars above their stated blue book cost – along with a utility trailer of theoretically unlimited value – should also be protected under Louisiana regulations. The proceeds from group health insurance policies or life insurance, any sums purely committed to burial services or associated memorials, pensions, tax deferred annuities, at least three quarters of the borrower’s income (depending upon the tax bracket) that has been earned but not yet paid out, and promised payments from the borrower to their employees are all safe guarded as well.
Many of the exemptions enacted by the Louisiana House of Representatives were clearly intended for more rural residents. Households are allowed to keep all poultry and one cow; family pets are, of course, not to be touched. Add to that the ordinary day to day family necessities such as linen, bedding, clothing (including sewing machine and pressing iron), china not considered particularly valuable, glassware, utensils provided they are not sterling silver, normal household furnishings (particularly furniture for living and dining rooms) and appliances, heating and cooling paraphernalia, and medical equipment essential to a family member’s health or rehabilitation. All of the family portraits and musical equipment of the Louisiana borrowers fall under state exemptions, and, alone among jewelry, wedding rings are exempted up to five thousand dollars. Military fire arms and accoutrements will be shielded without exception, and borrowers can also claim a single personal fire arm with a limit of five hundred dollars. Tools of trade – professional library, utilitarian instruments, uniforms, and the like – have a protection limit of seventy five hundred dollars. Once again, compared to the barely noticeable exemptions handed down by the United States Bankruptcy Code as the regulations currently read, the litany of freedoms from forfeiture offered by the Louisiana legislature are significant up grades. However, households should still look through the preceding list and think about how much of their lives would be arguably left up for auction at pennies to the dollar due to a misreading of value from government officials. Much as the liquidation of all unsecured obligations theoretically offered by Chapter 7 bankruptcy programs should be considered an obvious benefit, Louisiana debtors have to recognize that the risks of this protection might well outweigh any advantages.
There are, of course, other forms of bankruptcy beyond the Chapter 7 debt elimination protection that are available to Louisiana borrowers. Actually, this day and age, there are a variety of Chapters within the United States Bankruptcy Code offering assistance to everything from businesses with foreign investors to townships to family farms, but, for the individual Louisiana resident, the only other bankruptcy protection likely to be utilized would be the Chapter 13 debt reorganization program. While Chapter 13 bankruptcies have tended to remain the province of Louisiana families that either found they did not qualify for Chapter 7 protection or did not wish their household possessions threatened, some borrowers who have become quite reasonably worried over the glut of foreclosures sweeping across Louisiana employ the Chapter 13 alternative so that their primary residences would be safe guarded. Under the auspices of the Chapter 13 bankruptcy protection, the terms of even the borrower’s secured debts – that is, those debts already attached to real property like home mortgages – will be able to be reworked within the supervision of the Louisiana court trustee. Unfortunately, at the same time, the trustee will also design a new budget for the repayment of all of the borrower’s other debts as well which utilizes the guidelines of those aforementioned Internal Revenue Service guidelines for Louisiana household living expenses. Since, as we have written, these calculations are no longer legally bound to accurately reflect the actual expenses of Louisiana families and since the trustees are at pains to collect for the affected creditors the most possible money in the shortest amount of time, the temporary reprieve from cancelled utilities – or, more to the point, the legal guarantee of stays of home foreclosure – may in the end put households in ever greater distress.
With both the Chapter 7 and Chapter 13 bankruptcy programs, borrowers will find far more success and shield their families from risk by taking advantage of the expertise of bankruptcy attorneys familiar with both the national legislation and the local Louisiana statutes. Given that either the debtors’ household possessions or the entirety of the family budget will be eventually subject to the whims of the Louisiana court mandated trustee, experienced legal supervision should be considered virtually essential to the plans of any borrowers considering bankruptcy protection. Of course, employing skilled and trained attorneys to assist the Louisiana consumers through this process will come at a certain price, and not every borrower will be able to afford the prices that the better attorneys licensed in Louisiana are now able to charge. Following the country’s economic tribulations, more and more Louisiana borrowers have been clamoring for the assistance of Chapter 7 bankruptcies – whether or not they understand the limitations of the governmental protections as they now stand – and, accompanying the deluge, more and more attorneys have been changing their specialties toward bankruptcy law and raising their rates. Even if debtors should avoid the assistance of attorneys, they must still pay the ever increasing administrative charges demanded from the Louisiana county clerk (a money order for just under three hundred dollars will be requested before the bankruptcy declaration could be submitted) plus the fees for the credit counseling courses that the new legislation now forces every potential filer to pass before entering the Chapter 7 bankruptcy program and again before the appropriate loans will be discharged. Oddly enough, for the Louisiana borrowers that most need the help of bankruptcy to satisfy their outstanding debts, the process could honestly be too expensive nowadays.
As consequence of the modern failings of both Chapter 7 and Chapter 13 bankruptcy, a number of different debt management alternatives have risen in popularity, but these, too, have significant disadvantages for most of their clientele. Debt consolidation loans wreak havoc upon the equity of Louisiana borrowers’ primary residences at precisely the time when real estate values are dropping with unprecedented speed, and Consumer Credit Counseling programs inevitably do little more than organize a household budget for credit card repayment with minimal reductions of interest rates. Debt settlement negotiation, however, though it’s less well known than the other forms, may be the most effective of all of them. Through debt settlement, professional negotiators acting on behalf of Louisiana borrowers – although, often as not this age of the internet, the actual debt settlement company would be housed elsewhere and the professional only contact his or her clients through the computer or telephone – barter down the amount of the credit balances in return for a guarantee of speedy repayments of the percentage that remains. Like all of these programs, there will be a sizable cost (to be satisfied in turn with the payment schedule that the settlement professional designs; though, in this case, with the aims and capacity of the household in mind), and some Louisiana families, whether because of limited income or simply the wrong type of debt, won’t be deemed eligible for admission. However, once borrowers realize the woeful state of bankruptcy protection following legislation urged on by the interests of the lender conglomerates, there’s a special beauty in decreasing credit card bills through little more than the adept tweaking of creditor fears that Chapter 7 debt elimination bankruptcy could still liquidate the applicable debts. Debt settlement won’t take the place of Chapter 7 bankruptcies as they were once known, but, in the absence of proper governmental protection, it may well be the next best bet for Louisiana borrowers truly in need.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
