Louisiana Debt Relief: Your Guide to State Laws and Managing Debt
Home to a world-class city and some of the most distinctive dishes you’ll find this side of the Gulf of Mexico, Louisiana has more than earned its reputation for being one of the most vibrant, culturally rich regions in the country. But if your finances are stretched and you’re having trouble paying your bills, you may have a hard time appreciating all that the Pelican State has to offer.
Luckily, you don’t have to go it alone. If you live in Louisiana and are struggling to get out of debt, or shield yourself from unscrupulous debt collectors, there are a number of consumer resources available, including nonprofit credit counseling agencies and consumer protection attorneys. Louisiana also has a limited collection of consumer protection laws that are designed to supplement federal rules and protect you from overly aggressive debt collectors, excessive interest rates and more.
This article will take a closer look at borrowing in Louisiana and the laws you need to know to protect yourself. It will also look at the resources you can call on to help you in a jam.
- Debt in Louisiana: At a glance
- Debt collection in Louisiana
- Responding to collection letters
- Louisiana statute of limitations
- Louisiana debt relief programs
- Payday lending laws in Louisiana
- Tips to tackle debt in Louisiana
- Filing for bankruptcy in Louisiana
- The bottom line
Debt in Louisiana: At a glance
According to the New York Federal Reserve, the average Louisiana resident carries less credit card and mortgage debt than residents of most U.S. states. However, Louisiana ranks second in the country for automobile debt and 23rd in the country for student loan debt.
|Type||Per capita balance, 2018||Rank out of 50 states*||U.S. per capita balance|
|Credit card debt||$2,530||44||$3,220|
|Student loan debt||$5,360||23||$5,390|
|*No. 1 is the highest
**First lien debt only
Source: Federal Reserve Bank of New York, March 2019
Debt collection in Louisiana
If you fall behind on payments and default on your bills, your information may be passed on to a third party, such as a debt collection agency that’s in the sole business of recovering unpaid debt.
Debt collectors in Louisiana are bound by both federal and state rules that dictate how they can contact you, who they can contact and what tactics they can use to pressure you into paying all, or at least some, of your overdue debt. Federal law also protects consumers from being hassled over debts they don’t legally owe.
If you have debt that’s been sent to collections, it’s important to familiarize yourself with both federal and state laws so that you can recognize when a debt collector is breaking the law and know how to protect yourself if they cross the legal line.
Every U.S. borrower is protected by the Fair Debt Collection Practices Act (FDCPA), which strictly limits how debt collectors can solicit payments. For example, it bars debt collectors from calling you at “unusual” hours, such as in the middle of the night or very early in the morning.
It also bans them from intimidating you with foul language, threatening you with violence or repeatedly pestering you with excessive phone calls. Debt collectors are not allowed to mislead or trick you into making a payment, nor can they lie about the amount of debt you owe.
The Federal Trade Commission (FTC) has put together a helpful list of answers to some of consumers’ most frequently asked questions about what debt collectors can legally do.
Louisiana also has its own state legislation that bolsters the Fair Debt Collection Practices Act and helps protect Louisiana residents from being unduly pestered about an unpaid debt.
For example, under Louisiana Consumer Credit Law, creditors — not just debt collectors — are not allowed to talk about your debt to anyone outside of your household (except for a creditor or credit bureau), unless you say they can. So, for example, they can’t tell your boss that you owe money.
Under federal law, by contrast, only debt collectors are barred from contacting certain third parties, such as your boss or neighbors, about your debt.
Under Louisiana law, a creditor is also not allowed to contact you by mail more than once per month if you send written notice that you don’t want to be contacted anymore.
After they’ve received your written notice, a creditor is also not allowed to contact you in person more than four additional times about paying off your debt. However, a creditor can start contacting you again after they’ve sued you and secured a judgment.
The rules for debt collectors under federal law are a bit stricter. Once you’ve sent your written notice, a debt collector can’t contact you again except to let you know they are going to stop trying to collect money from you or that they are going to pursue further legal action.
Responding to collection letters
If a creditor or debt collector is contacting you about unpaid debt, you have a number of options available that will help you limit how often you hear from them. Depending on the nature of the debt, you may even be able to stop a debt collector from harassing you completely.
The first thing you should do once you’ve been contacted is figure out whether the debt is even yours and, if it does belong to you, how long it’s been since you defaulted. Don’t provide any personal information over the phone until you’ve confirmed the debt is genuine and the person calling you is from a real agency.
A debt collector must send you a written notice that states how much you owe and where the debt originated from.
Once you’ve received written notice of your debt, write a letter to the collection agency or, if warranted, the creditor stating that you no longer want to be contacted. That will help limit the number of times that they can legally reach out to you.
Make sure you send your notice by registered or certified mail, though, since Louisiana law specifically notes that a consumer’s letter should be registered or certified. Once the creditor or debt collector has received your letter, you’ll receive a slip back or a tracking notification proving that they’ve gotten it. That, in turn, may help you later on if you one day need to prove in court that the creditor or debt collector received your notice.
If you need help drafting your letter, check out the Consumer Financial Protection Bureau’s collection of sample letters for consumers who are responding to debt collectors.
If a debt collector or creditor is continuing to go after you after you’ve sent written notice asking them to cease communications, or if they are engaging in otherwise unlawful behavior, you can:
- File a consumer dispute with the Louisiana Attorney General’s office
- File a complaint with the Federal Trade Commission
- File a complaint with the Consumer Financial Protection Bureau.
Understanding your state’s statute of limitations
Louisiana state law also protects you from being sued for debt that’s so old that it’s passed the state’s statute of limitations.
It’s important to know your state’s statute of limitations because it dictates what creditors and debt collectors can do once your debt reaches a certain age.
If the debt is so old it has passed your state’s statute of limitations, then you’re no longer at risk of being sued. However, if you decide to acknowledge the debt and agree to pay all or a portion of it after the statute of limitations has passed, that could potentially restart the statute of limitations clock, depending on where the debt originated and the state’s law. You may want to consult with a Louisiana lawyer before you proceed.
For example, under Louisiana law, a debt collector or creditor can only sue you for overdue debt that’s less than three years old. If it’s been overdue for more than three years, then can still try to collect your debt. However, they can’t pursue legal remedies, such as suing and obtaining a judgment against you.
Unlike in some states, Louisiana applies the same statute of limitations to nearly all debt, including medical debt, mortgage debt, auto loan debt and credit card debt.
|Louisiana Statute of Limitations on Debt|
|Mortgage debt||3 years|
|Medical debt||3 years|
|Credit card||3 years|
|Auto loan debt||3 years|
|State tax debt||None|
Just because your debt has passed Louisiana’s statute of limitations doesn’t mean you’re off the hook, though. Your unpaid debt will still show up on your credit report for up to seven years after you defaulted, dragging down your credit score. You also won’t be able to discharge your private student loan debt if you declare bankruptcy (unless you can prove “undue hardship”) — even if it’s been overdue for more than three years.
Louisiana debt relief programs
If you’re struggling to repay your debt, you don’t have to suffer alone.
Louisiana has a number of nonprofit credit counseling companies that can help you take control of your debt — either by entering a debt management program, negotiating with your creditors or revamping your budget and altering your debt repayment strategy. A credit counselor can also help you learn more about your finances and confidently manage your money.
To help you find a reputable credit counseling service, the Department of Justice publishes a list of “approved credit counseling agencies” in each state, including Louisiana. These agencies have been specifically approved for counseling debtors who are getting ready to file for bankruptcy, according to the Federal Trade Commission. However, they can also help you with other credit concerns. If you don’t see an approved counselor in your area, you can also contact the National Foundation for Credit Counseling and see if they have a regional office nearby.
There are also a number of other debt relief companies and lawyers promising to help Louisiana debtors settle their debt. But be very wary: some debt relief companies have come under fire from federal watchdogs for engaging in deceptive practices. It’s crucial to research any company or agency thoroughly before you engage with them and check for public complaints.
If a creditor or debt collector (or any other financial company, such as a credit reporting company) is engaging in illegal practices, you may need to enlist a consumer lawyer to help you fight back and protect your consumer rights. FindLaw publishes a list of consumer protection attorneys by city, metropolitan area or parish. You can also search for an attorney through the National Association of Consumer Advocates’ attorney directory.
Payday lending laws in Louisiana
Payday loans are often advertised as easy short-term loans that you can turn to in a pinch. However, they are notorious for charging huge fees and causing some people to get into more debt than they can afford.
- Maximum loan amount: $350
- Maximum loan term: 30 days; however, up to 75% of your loan can be rolled over to the next month
- Finance charges: Up to 16.75% of the amount you borrowed
If you need money right away and can’t qualify for a less expensive loan, you may feel tempted to pursue a payday loan instead. Don’t. Payday loans can be extremely risky — especially if you roll over a portion of your debt rather than pay it off at the end of the loan term.
You have likely noticed payday lenders throughout the state of Louisiana. Although Louisiana allows payday lenders to operate in the state of Louisiana, it regulates them relatively strictly. For example, unlike some states, such as Colorado and Oregon, Louisiana does not allow payday lenders to set loan terms for longer than a month. It also limits how much you can borrow at one time (up to $350) and how much you can be charged for it.
According to the Louisiana Office of Financial Institutions, for example, the most a payday lender can charge for a small dollar loan is $20 for every $100 you borrow and one $10 fee. If you borrow the maximum amount of $350, the most you’ll owe is $55.
Louisiana does allow payday lenders to roll over a portion of your loan (up to 75%) to the next month, though, and charge you additional financing fees. However, as the Office of Financial Institutions notes, there are limits on how much payday lenders can charge you after you’ve defaulted. For example, if you fail to pay off your loan in full by the time it’s due, a lender can only charge you up to 36% for the first year your loan is overdue and up to 18% afterward.
Interest rate laws in Louisiana
In addition to setting limits on payday lenders, Louisiana also caps how much any lender can charge you over the course of a year.
For the first $1,400 you borrow, for example, the highest annual percentage rate (APR) a lender can charge you is 36%. The APR for the next $2,600 you borrow is capped at 27%. After that, you’ll be charged 24% until your balance hits $7,000. If you owe any more than that, the maximum APR on your remaining balance is 21%.
Tips to tackle debt in Louisiana
No matter how much you owe, there are steps you take to tame your balances and eventually become debt free. For example, you can:
- Consolidate some of your debt. If your credit score is high enough to qualify, you may be able to consolidate your debt onto a lower rate personal loan or credit card.Depending on the loan, that may allow you to save money on interest or secure lower, more predictable monthly payments. Pooling your debt into just one loan can also help you keep better track of what you owe and feel less overwhelmed by it. That said, you may end up paying more over the long run if you consolidate your debt onto an installment loan with an especially lengthy repayment period.
- Refinance your debt. You may also be able to work with your lender or with a third party to refinance one of your larger loans, such as your mortgage or auto loan, at a lower interest rate or with a longer payment term.That will allow you to either secure more affordable terms or lower your monthly payments so that you can free up cash for other, higher rate debts.Additionally, if you have a large amount of student loan debt, you can consolidate your debt onto a private loan with a lower APR. Be aware, though, that if you refinance federal student loan debt by transferring it to a private company, you will lose access to certain protections, such as the ability to defer your payments or set up an income-driven repayment plan.
- Use a balance transfer card with a promotional APR. If you have good to excellent credit, you may also be able to transfer your debt to a card with a low or 0% APR. Many balance transfer cards give consumers as long as 12 to 21 months to pay off a balance without incurring any interest.However, you typically need a strong credit score to qualify for the best promotions. You may also get stuck with a high interest rate on your remaining debt if you can’t afford to pay it all off at the end of the card’s promotion.
- Negotiate better terms with your creditor. If you can prove financial hardship, you may be able to convince your lender to lower your interest rate or minimum payment or work with you on a more manageable debt repayment plan.
- Enter into a debt management plan. If you’re really struggling with a lot of debt, you can also work with a nonprofit credit counseling agency on a debt management plan that’s created in partnership with your creditor. Typically for a fee, an agency will negotiate terms with your creditor that are easier for you to tackle, such as lowering your monthly payment, and will help you and your creditor agree to a doable long-term repayment plan.
Filing for bankruptcy in Louisiana
If you feel that you’ve run out of options and your only way out of your debt is to discharge it, then you have the option to file for bankruptcy for most kinds of debt. One of the few exceptions is student loan debt, which can’t be discharged (unless you can prove that the payments are causing you extreme hardship).
Bankruptcy is a big step, though, that can haunt your credit for up to seven to 10 years, depending on the type of bankruptcy. So you’ll want to think carefully before you pursue it.
In Chapter 7 bankruptcy, you’ll have to give up many of your most valuable assets and possessions so that the proceeds can go toward your unpaid debt. With Chapter 13 bankruptcy, you may be able to hold onto more of your assets. However, you’ll have to enter into a long-term repayment plan and so you won’t be able to just walk away from your debts.
Despite its costs, bankruptcy can help free you from debt you can’t afford and allow you to move on with your life. So it’s worth considering if your finances are in especially dire straits.
The bottom line
Debt can have a crushing impact on your quality of life and your ability to move forward with your finances. However, you don’t have to combat your debt alone. There are nearby resources available and laws on your side that can help you rebuild your finances and protect yourself from further harm.
The information in this article is accurate as of the date of publishing.