What are the Louisiana Bankruptcy Exemptions?

What are the Louisiana bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

When you’re thinking about whether or not to move forward filing bankruptcy there are a lot of details to keep straight. One of the most important is to make sure that you understand bankruptcy exemptions. Bankruptcy exemptions are special laws that exist that help you keep some (or even all) of your personal property even if you can’t pay all your debts.

Here’s how it works. In a typical Chapter 7 bankruptcy, the basic idea is that you turn over all of your property to the bankruptcy estate, where your bankruptcy trustee liquidates (or sells) it and then shares it equally among your unsecured creditors, like credit card companies.

Now keep in mind that one of the main purposes of offering bankruptcy as a debt relief remedy is to give the debtor (or filer) a fresh start. Realistically you can’t start fresh if you’re completely starting over. So, by using these bankruptcy laws to protect both real and personal property, up to varying amounts, you can maintain a basic standard of living so that you can get that fresh start.

It’s partly a balancing act, though, between keeping this fair for the debtor as well as their creditors. It wouldn’t be fair for someone to keep investment properties and luxury items at the expense of not paying their existing bills. If any exemption or property item is in dispute during a bankruptcy case, either party can raise the issue and ask the bankruptcy court to decide whether the property is nonexempt. 

Does Louisiana allow the use of federal bankruptcy exemptions?

Every state has its own set of bankruptcy exemptions, which are available to residents who file bankruptcy in that state. There is also a set of federal exemptions available under the United States Bankruptcy Code.

Each state can decide whether to allow its residents to choose between their state exemptions and the federal exemptions. Louisiana is an “opt-out” state, which means that residents are limited to using only the Louisiana state exemptions. Debtors filing in Louisiana can, however, use any of the federal nonbankruptcy exemptions that they qualify for as a supplement to the state exemptions.

You do need to keep in mind, however, if you meet the residency requirement to use the Louisiana state exemptions. Only residents who have lived in Louisiana for more than two years (sometimes called the 730-day rule) qualify to use those state exemptions.

If you haven’t lived in Louisiana that long, you’ll need to use different exemptions. Usually, that’ll be the state you lived in before, but the timing matters. You’ll use the exemptions for the state where you spent most of the 180-day period before two years before you file your case.

A simpler way to look at it is to look back two and a half years ago for the initial six-month period. If that prior state allows for a choice between its state exemptions and the federal bankruptcy exemptions, you can also choose which set you prefer to use.

Louisiana Bankruptcy Exemptions

In Louisiana, married couples filing jointly can each claim a full exemption for most property that they own together. This is called doubling. Married couples can’t, however, double the homestead exemption, which we will discuss below.

Real Property - the Louisiana Homestead Exemption

Under Louisiana law, you can protect up to $35,000 in equity in the home in which you live and the land on which it sits. The Louisiana homestead exemption differs based on where you live, as you are limited to protecting up to five acres if it’s located in a town or city but you can protect up to 200 acres outside of the metro area. (La. Rev. Stat. Ann. § 20:1) As stated above, married couples can’t double this exemption, but any individual could exempt the full value of the home if obligations arise as a direct result of a catastrophic or terminal illness or injury.

Personal Property Exemptions

Louisiana personal property exemptions can be doubled for married couples filing jointly, so long as both spouses have an ownership interest.

Louisiana filers can protect their household goods and furnishings, appliances, clothing, family portraits, military accoutrements, musical instruments, poultry, fowl, one cow, dogs, cats, other household pets, without limit so long as used by the filer or a member of the filer’s family. (La. Rev. Stat. Ann. § 13:3881) This specifically includes any bedding, linens, and bedroom furniture, chinaware, glassware, utensils, silverware, (non-sterling), clothing, heating, and cooling equipment, living room, and dining room furniture, pressing irons, sewing machine, refrigerator, freezer, stove, washer, and dryer.

Filers in Louisiana can also protect cemetery spaces and a spendthrift trust. (La. Rev. Stat. Ann. §§ 8:313, 9:2004)

Some property items have specific value limits. For example, Louisiana filers can also protect wedding rings or engagement rings up to $5,000 in value. (La. Rev. Stat. Ann. § 13:3881(5)) Similarly, Louisiana filers can protect firearms, arms, and ammunition up to $2,500. In both of these instances, married couples filing jointly can double the exemption amounts.

Additionally, Louisiana filers can protect up to $7,500 in one motor vehicle used by you and your family. Please note that there is an asset limit in this exemption, so a married couple filing together could still only protect one vehicle, but they could protect up to $15,000 of equity instead. You may also exempt up to $7,500 of additional equity in one motor vehicle which is modified or fitted to assist you or a family member with a physical disability. (La. Rev. Stat. Ann. § 13:3881(A)(7), (8))

Miscellaneous Personal Property Exemptions

Louisiana bankruptcy exemptions also offer protections beyond the above personal property. Any tools of the trade, including tools, instruments, books, and one utility trailer are protected in full. (La. Rev. Stat. Ann. § 13:3881) Additionally, the property of a minor child is also protected without limit. (La. Rev. Stat. Ann. § 13:3881A(3), Civil 223)

Money Benefits

Some property can’t be touched. The below money benefits and proceeds are protected in full or up to the amount stated under Louisiana laws. This includes wages, where you can protect 75% of disposable earnings or 30 times the federal minimum wage, whichever is greater. (La. Rev. Stat. Ann. § 13:388) You can also protect, in full, the money you receive as a  Federal Earned Income Tax Credit. (La. Rev. Stat. Ann. § 13:3881)

Louisiana filers can also protect some life insurance policies, benefits, and proceeds, including:

• Insurance proceeds for exempt property damaged by a natural disaster (La. Rev. Stat. Ann. § 13:3881)

• Fraternal benefit society benefits (La. Rev. Stat. Ann. § 22:558)

• Group life insurance (La. Rev. Stat. Ann. § 22:649)

• Accident and health insurance proceeds. (La. Rev. Stat. Ann. § 22:646)

Other Louisiana Exemptions

Louisiana exemptions also protect certain public and retirement accounts and benefits, whether or not you are in a bankruptcy case.

These public benefits include the following, without limit.

• Fraternal benefit society benefits. La. Rev. Stat. Ann. §§ 22:558, 22:564

• Workers’ compensation other than support obligations. La. Rev. Stat. Ann. § 23:1205

• Unemployment compensation. La. Rev. Stat. Ann. § 23:1693(A)

• Public assistance. La. Rev. Stat. Ann. § 46:111

• Crime victims’ compensation. La. Rev. Stat. Ann. § 46:1811

Louisiana laws also protect the following pension and retirement benefits in full:

• State employees. La. Rev. Stat. Ann. § 11:405

• Teachers (other than for support obligations.) La. Rev. Stat. Ann. §§ 11:704, 20:33(1)

• Orleans Parish School employees. La. Rev. Stat. Ann. § 11:951.3

• Louisiana State University employees. La. Rev. Stat. Ann. § 11:952.3

• School employees other than for support obligations. La. Rev. Stat. Ann. § 11:1003

• Judicial members (other than for support obligations.) La. Rev. Stat. Ann. § 11:1378

• La. Rev. Stat. Ann. § 11:1403

• County clerks (other than for support obligations.) La. Rev. Stat. Ann. § 11:1526

• District attorneys. La. Rev. Stat. Ann. § 11:1583

• Municipal employees (other than for support obligations.) La. Rev. Stat. Ann. § 11:1735

• Parochial employees. La. Rev. Stat. Ann. § 11:1905

• Registrar of voters. La. Rev. Stat. Ann. § 11:2033

• Municipal police. La. Rev. Stat. Ann. § 11:2228

• Firefighters, sheriff, and police (other than for support obligations in some cases). La. Rev. Stat. Ann. §§ 11:2182, 11:2263, 11:3140, 11:3513, 33:2035

• City of Alexandria employees. La. Rev. Stat. Ann. § 11:3014

• City of Monroe bus driver. La. Rev. Stat. Ann. § 11:3770

• City of Monroe electrical workers. La. Rev. Stat. Ann. § 11:3770

• City of New Orleans Sewage and Water Board. La. Rev. Stat. Ann. § 11:3823

In addition, all qualified pensions, tax-deferred arrangements, annuity contracts, and proceeds of and payments under tax-deferred arrangements and annuity contracts, except as needed to satisfy support obligations are protected in full under Louisiana bankruptcy exemptions. (La. Rev. Stat. Ann. § 13:3881)

Filing Chapter 7 Bankruptcy? 

Any decision about a bankruptcy filing needs to take into account a lot of factors, including whether it’s the best debt relief for you or whether you should try another option like a repayment plan. It can be very helpful to meet with a bankruptcy lawyer to discuss the pros and cons of filing Chapter 7 bankruptcy under your current financial circumstances. The good news is that most bankruptcy attorneys offer a free initial consultation where you can talk about these matters. It’s also a good way to check if Chapter 7 makes sense for you, or whether Chapter 13 bankruptcy might be a better option.  Keep in mind that Chapter 13 cases include a repayment plan and take much longer, so having an attorney is typically necessary. If, however, it becomes clear that you’re going to file Chapter 7 bankruptcy and you can’t afford to hire an attorney to help you through it, there are still resources available to help. You can start by checking Upsolve’s screening tool to see if you qualify for a free online web app to help you complete your forms and keep track of all of the details and deadlines so that you can complete a successful Chapter 7 bankruptcy as smoothly, and quickly, as possible.