People in Louisiana overwhelmed by their debts have the option of pursuing bankruptcy protection under the provisions of Chapter 13. A Chapter 13 bankruptcy requires a debtor to develop a payment plan based on current income. A bankruptcy court will review this proposal, and, if approved, direct the trustee to collect payments from the debtor for three to five years.
Depending on the debts, creditors can have differing levels of claims. A priority claim represents a debt such as taxes or the fees for processing a bankruptcy. Secured claims are loans based on collateral. The creditor has a right to seize specific property if a loan is not repaid. Unsecured claims arise from loans made without any collateral.
In general, a plan must require a debtor to repay priority claims completely. In some instances, a creditor might forgo a portion of a priority claim. A bankruptcy might enable a debtor to keep collateral while repaying a secured debt as long as the payment plan grants the creditor the actual value of the collateral. In other situations, however, a secured claim might require complete repayment of the loan. Unsecured claims have the lowest priority, and these creditors might only receive a portion of what they were originally owed.
A person often seeks out legal advice when making the decision to file for Chapter 13 bankruptcy. An attorney could review the person's income and help craft a payment plan. Legal insights could help the client understand which debts have priority. If creditors challenge the terms of a proposed payment plan, then an attorney could act to defend the debtor's position and potentially negotiate a plan acceptable by all parties.