June 26, 2020
If you file for bankruptcy in Louisiana, you won't lose everything. You can protect the things you'll need to work and live using Louisiana's bankruptcy exemption laws. Read on to learn about the property covered by Louisiana's bankruptcy exemptions.
You'll find some of the more common Louisiana exemptions below. Here are a few things to keep in mind:
Louisiana is the first state to exempt stimulus payments related to COVID-19. You'll use the new law to protect your payments from all creditors other than those collecting spousal or child support. This law doesn't apply to increases in unemployment compensation received due to COVID-19, however. La. Rev. Stat. Ann. §13:3881(A)(10).
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 is limited to five acres if it's located in a town or city and up to 200 acres outside of the metro area. For obligations arising as a direct result of a catastrophic or terminal illness or injury, you can exempt the full value of the home. Spouses cannot double the Louisiana homestead exemption. La. Rev. Stat. Ann. § 20:1
For more details, see The Louisiana Homestead Exemption.
To $7,500 of equity in one motor vehicle used by you and your family. You may also exempt up to $7,500 of 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)
To learn more, see The Louisiana Motor Vehicle Exemption in Bankruptcy.
You can protect some life insurance benefits, including the insurance proceeds for exempt property damaged by a natural disaster, fraternal benefit society benefits, and accident and health insurance proceeds. La. Rev. Stat. Ann. §§ 13:3881, 22:558, 22:564, 22:646, 22:647.
The household goods and furnishings, appliances, clothing, family portraits, arms and military accouterments, musical instruments, poultry, fowl, one cow, dogs, cats, other household pets, and wedding or engagement rings up to $5,000 in value. La. Rev. Stat. Ann. § 13:3881
The money you receive from the Federal Earned Income Tax Credit is exempt, as well as your guns and ammunition up to a value of $2,500. La. Rev. Stat. Ann. § 13:3881
You can also protect cemetery spaces and a spendthrift trust. La. Rev. Stat. Ann. §§ 8:313, 9:2004
Pension, Retirement, and Life Insurance Benefits
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. La. Rev. Stat. Ann. § 13:3881
Retirement benefits are also exempt for:
Qualified retirement accounts are exempt under the federal rules and can be used in every state, regardless of the exemption scheme used. For current amounts, see Your Retirement Plan in Bankruptcy.
75% of disposable earnings or 30 times the federal minimum wage, whichever is greater. La. Rev. Stat. Ann. § 13:3881
Tools of the Trade
Tools, instruments, books, and one utility trailer. La. Rev. Stat. Ann. § 13:3881
Miscellaneous Louisiana Exemptions
You should be aware that additional exemptions exist and that Louisiana's exemption amounts adjust periodically. To make sure you have the most recent figures, be sure to check for any updates at the website of the Louisiana Legislature at www.legis.state.la.us or by consulting with a local bankruptcy lawyer.
Whether you'll lose or keep nonexempt property depends on the bankruptcy chapter you file.
Not sure which chapter to file? Start by reading When Chapter 7 Bankruptcy Is Better than Chapter 13 Bankruptcy.
If you don't exempt your property carefully, you could lose it, or pay for it, depending on the bankruptcy chapter. You'll want to steer clear of these common issues.
Example. Mason owns a rare, classic car worth $15,000 but the state vehicle exemption won't adequately protect it. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C disagrees with Mason's characterization and files an objection to the exemption with the court. After consideration, the judge will likely side with the trustee and determine that the vehicle doesn't qualify as a piece of art.
You don't want to finesse exemptions. Not only do you have an obligation to supply correct information on your bankruptcy forms, purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.