The
process of bankruptcy offers debtors a clean slate when they are
overwhelmed by financial burdens. Once a bankruptcy case is
completed, however, the debtor will still need basic possessions and
assets to move their life forward. Fortunately, the Bankruptcy Code
recognizes these basic needs and provides a variety of property
exemptions for debtors. If property is exempt, it will not be subject
to the claims of creditors.
Under
new bankruptcy law, a debtor will be required to submit a schedule or
list of exempt property when they file the bankruptcy petition. The
schedule should include a description of the property, specifying the
law authorizing the exemption, and list the value of the exemption
and its market value. This information allows parties involved in the
case to evaluate the exemption claim and submit any legitimate
objections within 30 days from the meeting of the creditors. If
someone objects, they must prove that the exemption has been
improperly claimed.
Every
bankruptcy case is evaluated separately but in most cases, the debtor
does not have to give up their property or necessary possessions.
During and after the closing of the case, the exempted property is
protected by law. In fact, not only are you allowed to keep the
exempted property, but also the equity, if any, that one may have on
the property. Equity is the difference between the value of the
exempted property and the remaining debt.
Homestead
Exemption
The
homestead exemption applies to property used as a residence. Current
Louisiana law limits a homestead exemption to $35,000. The homestead
exemption is also limited if it is used to delay, hinder, or defraud
a creditor.
Automobiles
The
exemption amount for an automobile under Louisiana law is $7,500.
The equity in the vehicle is based on its market value less any
loans. If the trustee sells it, the debtor is entitled to receive the
exemption amount. It is also possible to pay the trustee the amount
above the exemption and keep the vehicle.
Household
Items
Louisiana
law provides unlimited exemptions for household items. These types
of items have low resale value and most bankruptcy trustees will not
view them as a viable source of assets to use in repaying creditors.
Retirement
Assets
Debtors
can exempt retirement funds under § 522(d)(12) of the Bankruptcy
Code. The exemption applies to pension, profit sharing and stock
bonus plans, employee annuities, Individual Retirement Accounts
(IRAs), deferred compensation plans such as a 401(k) account, and
certain trusts