Your phone won’t stop ringing, and every voicemail is another creditor. You’ve probably heard both Chapter 7 and Chapter 13 bankruptcy mentioned by now, and neither term explains itself once you start reading the fine print.
Chapter 7 clears most unsecured debt within a few months based on your income and what you own. Chapter 13 stretches repayment over three to five years so you can catch up on a house or car while the remaining unsecured debt gets discharged at the end. Which path fits your numbers in Louisiana depends on your income, your assets, and what you’re trying to hold onto.
Kathryn Wiley at Wiley & Jowers has spent more than 15 years walking Acadiana families through exactly this decision. A free consultation can show you where you stand before the next payment comes due.
How Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, clears qualifying unsecured debt by reviewing what you own and selling anything that isn’t protected by an exemption.
Under the federal Bankruptcy Code, an appointed trustee gathers your nonexempt assets, sells them, and distributes the proceeds to creditors. Most filers keep the bulk of their property, since Louisiana’s exemptions cover a home, a vehicle, and household goods. Once the case closes, usually within three to four months, remaining unsecured debt such as credit cards and medical bills gets discharged and you owe nothing further on it.
Whether you can file this way at all comes down to Louisiana’s means test.
Louisiana’s Means Test: Who Automatically Qualifies for Chapter 7
Before you can file Chapter 7, Louisiana’s means test compares your household income to the state median for your family size. Passing that first comparison decides whether you can move straight to Chapter 7 or need to run a fuller calculation.
When Your Income Falls Below the Median
According to the U.S. Trustee Program, the median income for a four person household in Louisiana is $103,628. If your average income over the past six months sits below that number for your family size, you clear the means test automatically and can move forward with Chapter 7.
When Your Income Runs Above It
Income above the median doesn’t rule you out. It means the court runs a second calculation, weighing your income against allowed monthly expenses to see what’s left over. If that leftover amount is small enough, Chapter 7 can still work. If it isn’t, Chapter 13 tends to be the more realistic route, since it captures that disposable income in a repayment plan instead of asking creditors to walk away with nothing.
How Chapter 13 Bankruptcy Works
Chapter 13 bankruptcy sets up a court approved repayment plan instead of selling property, giving you room to protect assets you might lose under Chapter 7.
- Keep your house, car, or other secured property as long as plan payments stay current
- Catch up on missed mortgage or car payments over three to five years instead of all at once
- Stop foreclosure and repossession the moment the case is filed, through the automatic stay
- Discharge remaining unsecured debt at the end of the plan, similar to a Chapter 7 discharge
Chapter 13 also carries its own debt ceilings, currently $526,700 in unsecured debt and $1,580,125 in secured debt for cases filed through March 2028.
Qualifying for this plan also takes steady income, which is one of the first things a Louisiana bankruptcy attorney reviews before recommending either Chapter 7 or Chapter 13 as an option.
What Happens to Your House and Car When You File for Chapter 7 or Chapter 13 Bankruptcy?
Property worries drive most of the hesitation around filing, and both chapters treat a home and vehicle with more protection than people expect.
Louisiana’s homestead exemption, La. Rev. Stat. § 20:1, shields up to $35,000 of equity in the home you live in, on a lot no larger than five acres inside a municipality or two hundred acres outside one. A separate exemption protects $7,500 of equity in one vehicle.
In Chapter 7, if your equity in either falls under these limits, the trustee has no reason to sell them. In Chapter 13, the same exemptions apply, but the bigger advantage is time.
Falling behind on a mortgage or car note doesn’t have to end in foreclosure or repossession. The repayment plan lets you spread the past-due amount across the plan while you stay in the home and keep driving the car. That trade, protection now against a longer commitment later, is often the real decision sitting underneath the paperwork.
If you’re unsure whether your home equity or car loan balance falls inside these limits, Wiley & Jowers can run the numbers with you.
When Chapter 13 Might Fit Better Even Though You Qualify for Chapter 7
Passing the means test doesn’t settle the question on its own. Some filers who qualify for Chapter 7 choose Chapter 13 anyway because they’re behind on a mortgage or car note and need time to catch up without losing the property outright.
The type of debt on the table matters just as much as the property does.
Chapter 7 wipes out unsecured debt like credit cards and medical bills, but it doesn’t touch child support arrears, most recent tax debt, or student loans. Student loans can sometimes be wiped out, but only if you go to court and prove paying them back would cause you serious hardship. Courts rarely grant this.
Chapter 13 handles those debts differently, since the repayment plan can fold overdue child support or priority tax debt into the same three to five year schedule used for catching up a mortgage or car note.
If a real share of what you owe falls into the categories above, that alone can tip the decision toward Chapter 13, even for someone who’d otherwise qualify for a faster Chapter 7 case.
A Chapter 7 and Chapter 13 bankruptcy attorney in New Iberia can walk you through both scenarios, since the numbers that clear a means test don’t always match what someone wants to keep.
FAQs About Chapter 7 vs. Chapter 13 Bankruptcy in Louisiana
How long does a Chapter 7 or Chapter 13 stay on my credit report?
A Chapter 7 sits on your credit report for up to 10 years, while a Chapter 13 drops off after 7 years since you repaid part of what you owed. Either one dings your score at first, but most filers see it climb back within a couple of years of on time payments. Ask your attorney about rebuilding credit as soon as your case closes so you’re not starting from scratch.
Can I switch from Chapter 13 to Chapter 7 partway through my case?
Federal law gives you the right to convert at any time. But courts don’t all agree on whether you have to pass the means test again when you convert. Your attorney can tell you how the bankruptcy court in your area handles this.
What debts don’t get wiped out in either chapter?
Most student loans, recent tax debt, child support, and criminal fines survive both Chapter 7 and Chapter 13. Alimony and other domestic support obligations are treated the same way in each. If most of what you owe falls into these categories, your attorney can walk through whether bankruptcy solves as much as you’re hoping.
Wiley & Jowers LLC: Your New Iberia Bankruptcy Law Firm
Comparing Chapter 7 and Chapter 13 on your own means guessing at numbers you can’t fully see yet, like what a trustee would count as unprotected property or whether your income clears this year’s median. Wiley & Jowers reviews those numbers with you directly, starting with your income, your debts, and what you’re trying to protect, before recommending a path.
Kathryn Wiley has sat across the table from hundreds of Acadiana families working through this decision. Contact our firm today, and bring your questions along with you.
