An Introduction To Bankruptcy Exemptions
If you have questions about personal bankruptcy, you’ve come to the right place! At The Cook Law Firm blog, we focus on creating content that helps our clients and the public in general gain a greater understanding of bankruptcy, how it works, and how it affects those who undergo it.
The truth is, many people write bankruptcy off because it has such a contentious reputation at large. This is a shame because bankruptcy is specifically designed to help people regain control over their finances. That said, there is a lot to bankruptcy. From the legal processes and paperwork involved to stress and anxiety that come with the circumstances, all the moving parts can make the process seem daunting.
What’s more, when people attempt to file for bankruptcy unassisted, they can fail to understand the variety of aspects that have been built into the processes of bankruptcy to ensure people are able to complete the proceedings without being left out to dry.
In today’s blog, we’re going to talk about one of these aspects of bankruptcy that is in place to help lessen the financial load associated with bankruptcy — bankruptcy exemptions.
Keep reading to learn more!
What Are Bankruptcy Exemptions
In short, bankruptcy exemptions allow certain types of property or assets to be exempt from seizure in the bankruptcy process. Now, let’s tear apart what that means.
First, it’s important to recognize that bankruptcy exemptions are only applicable to Chapter 7 bankruptcy. In Chapter 7 bankruptcy, non-exempt property is seized by the bankruptcy court before being liquidated and distributed among creditors. In Chapter 13 bankruptcy, on the other hand, no property gets seized because the bankruptcy court and filing party create a repayment plan to address and deal with debts.
Now, with the exemptions associated with Chapter 7 bankruptcy, there are some things to keep in mind. First off, each and every individual Chapter 7 bankruptcy case is going to look and proceed differently from others. Each unique bankruptcy case is going to qualify (or not qualify) for different exemptions, has unique assets, and a specific financial context, which means there’s no cookie-cutter, by-the-numbers plan to expect if you’re considering bankruptcy.
Finally, in Louisiana, bankruptcy exemptions are created and managed on the state level. This is important to note because while there are federal bankruptcy exemptions, Louisiana disregards those for the ones of its own creation.
While this may make the process all the more intimidating, don’t worry, that’s what The Cook Law Firm is here for. A bankruptcy attorney works to not just represent you and your interests in bankruptcy court but to also properly file paperwork and advise you through the process. This includes ensuring that you’re filing all of the applicable exemptions, and properly at that.
Since we’ve covered what bankruptcy exemptions are, let’s take a look at the general types of bankruptcy exemptions in Louisiana.
The Homestead Exemption
The homestead exemption protects up to $35,000 of your home and property’s equity. While this exemption is automatically applied, it does change based on where you live. For those in the city/a metropolitan area, you’re able to exempt up to five acres of your property, where people outside of the city are able to exempt up to 200 total acres. And, if you meet a particular set of criteria, there is the potential that your home’s full value could be exempt.
Motor Vehicle Exemption
As we talked about before, while bankruptcy is designed to pay back some or all of your debts, it doesn’t intend to leave you high and dry by any means. That’s why Louisiana also offers a vehicle exemption for those filing bankruptcy. This exemption allows for up to $7,500 of your vehicle’s value to be exempt. And if you have a vehicle outfitted to transport someone with a disability, you may be eligible to exempt up to another $7,500 from that vehicle as well.
In Louisiana, there are a considerable number of benefits that are able to be marked exempt. However, benefit exemptions are arguably one of, if not the most intensive, varied, and specific type of bankruptcy exemption. A shortlist of benefits that may be eligible for exemption includes life insurance, pensions, retirement, and so much more. Again, because benefits exemptions are entirely determined on a case-by-case basis, it’s most productive to discuss and determine which are applicable to you by consulting with a bankruptcy attorney.
If you were worried that you would have to give up all your possessions and money to complete bankruptcy, that’s not at all the case. In fact, as far as wages are concerned, you can automatically exempt up to 75% of your disposable income, or 30 times of Louisiana’s minimum wage, depending on which is applicable to you.
Personal Property Exemptions
Things like household goods, pets, instruments, and other types of personal property are exempt from Chapter 7 bankruptcy! Again, there’s no need to worry that you’ll have to give up all your property and start from square one. Instead, the bankruptcy court seizes the assets that will serve to compensate creditors without removing essential day-to-day items from your life.
COVID-19 Relief And Other Miscellaneous Exemptions
One of the most recent additions to the list of Louisiana bankruptcy exemptions is the COVID-19 relief payment exemption. However there are a variety of other helpful exemptions out there such as the victim of a crime payment exemption, unemployment compensation exemptions, public assistance exemptions, and more.
The Cook Law Firm Will Help You Through Bankruptcy
If you started this blog thinking that bankruptcy leaves you with no money or property, we hope we’ve left you with a new mindset about this process! While it can be difficult, it’s not designed to hurt you, rather it actively works to correct your financial situation and relieve you of your debts at the end of the process.
That said, bankruptcy will be difficult and potentially ineffective if you try to go through it alone. While not impossible, the assistance of an experienced bankruptcy attorney can do wonders in not only making the process as stress-free and efficient as possible but also ensuring that you’re getting the most out of the process and doing it correctly.
If you’re ready to — or even considering — filing for bankruptcy, contact The Cook Law Firm today! We can help determine which type of bankruptcy is the most logical solution for you and your situation, and which exemptions you’re eligible for if you’re undergoing Chapter 7 bankruptcy.