Most people have heard stories about the bankruptcy courts forcing people to sell their assets, but those stories are often exaggerated, if not outright fabricated. While asset liquidation is sometimes necessary, it is relatively rare.
The possibility of mandatory asset liquidation is one of the strongest deterrents to personal bankruptcy filings. People who have valuable property that they rely on for daily life worry about forced liquidation or sales of those assets.
Particularly in cases where Louisiana residents pursue Chapter 7 bankruptcy, their resources may be vulnerable to liquidation if they cannot exempt their assets under current Louisiana statutes. Professionals and parents who rely on their personal vehicles for regular transportation may worry about the possibility of the courts forcing them to sell their vehicles during bankruptcy.
Louisiana state exemptions protect vehicle equity
There are bankruptcy exemptions enshrined in federal law, as well as state-level exemptions. Louisiana is an opt-out state, which means that filers pursuing Chapter 7 release in Louisiana can only use state exemptions.
Thankfully, Louisiana does offer exemptions for motor vehicles. Specifically, individual filers can protect up to $7,500 of equity for any vehicle they use for themselves or their family. The law even provides a secondary $7,500 exemption for another vehicle if someone in the family has disabling medical conditions that require a substantially modified vehicle.
In cases where accrued vehicle equity exceeds the exemption threshold, the Chapter 7 bankruptcy process may require that a filer take out a loan or withdraw vehicle equity as a means of repaying creditors.
In a Chapter 13 bankruptcy, asset liquidation is not necessary. Filers can typically preserve the entire amount of vehicle equity that they have accrued prior to the bankruptcy filing. They may also be in a position to negotiate with the lender for a loan modification that could help them bring the vehicle loan back into good standing and reduce the risk of repossession.
Reviewing valuable assets and financial obligations with a skilled legal team can help those considering a personal bankruptcy filing determine what chapter of bankruptcy may work for them and what exemptions could help protect their resources if they opt for Chapter 7 proceedings. Both Chapter 7 and Chapter 13 bankruptcy can be helpful for those concerned about overwhelming financial obligations, including those who want to preserve their vehicle ownership status.