Turbo Takeaways
- Rising expenses and limited income growth have pushed many Louisiana households to seek effective ways to manage debt.
- Debt relief programs provide residents breathing room to rebuild savings and regain control over their finances.
- Taking action now can help turn your financial setbacks into opportunities for recovery and break free from debt.
Your Options To Get Out of Debt in Louisiana
From the rambling bayous to the streets of New Orleans, the Pelican State is home to more than great jazz and spicy gumbo.
Yet, despite its rich culture, Louisiana residents are struggling to meet basic expenses amid inflation and a stagnant job market, leading them deeper into debt.
Louisiana citizens take home a median household income that’s significantly less than the national average. It’s not surprising then that 18% of Louisiana residents live in poverty compared to 11% nationally.
Pelican State residents need options to get out of debt and use more of their income to build a better future. Continue reading to discover the available debt relief programs in Louisiana.
Credit Counseling
Credit counseling organizations offer solutions for financial management through resources and personal advising.
How It Works
Credit counseling provides practical support for Louisiana residents looking to change how they manage their finances.
Whether this means planning to overcome debt or learning more about budgeting, certified credit counselors offer a strong foundation for reshaping how Pelican State citizens handle their money.
Pros
- Low-cost way to start solving your debt problems
- Helps identify effective strategies to clear debt
- Offers guidance from certified credit counselors
Cons
- Doesn’t directly pay or reduce your debt
- Progress depends on following the counselor’s plan
- May require time commitment for education courses
Cost
Credit counseling usually costs very little, with low-income individuals in Louisiana often qualifying for free services.
Stats
- Although credit counseling offers Louisiana residents helpful advice, more consumers have chosen to enroll in debt settlement as a debt relief solution over the past decade.
Resources
Find credit counseling programs in Louisiana through the Financial Counseling Association of America.
Debt Management
A debt management program (DMP) coordinates the distribution of your monthly debt payments in return for a fee.
How It Works
Many credit counseling agencies also provide debt management programs as an option for clients.
When enrolling in a DMP, you’ll create a payment plan for each account and send a single monthly payment to the debt management company, which then distributes the funds to your creditors.
Pros
- Organizes multiple debts into one monthly payment
- Counselors may negotiate lower interest or waived fees
- Reduces risk of missed or late payments
Cons
- Most plans require you to close revolving credit lines and credit card accounts
- Missed payments can cancel negotiated benefits
- Monthly service fees for each managed account
Cost
You’ll pay a small enrollment fee to get started, typically around $40.
Once you set up your payments, you’ll also owe a fee for each account you enroll in the plan to help cover the costs of the company administering your plan and keeping you on track. This monthly fee ranges from $25 to $35 per account.
Stats
- Louisiana residents carry an average consumer debt of $80,000, making debt relief options like DMPs essential for many across the Pelican State.
Resources
Read more about debt management and how it works.
Debt Consolidation
Louisiana residents who want to structure their own debt repayment opt to consolidate debts through a new balance transfer credit card or by taking out a debt consolidation loan.
How It Works
For small to medium-sized credit card debts, Pelican State residents might benefit from opening a new zero-interest balance transfer credit card. After transferring any outstanding balances to the new card, it becomes easier to start making larger payments without incurring high interest charges.
Another option is to take out a debt consolidation loan to cover unsecured debts like credit cards, medical bills, and payday loans, then pay off all these accounts. This leaves you with a single, potentially lower-interest monthly payment.
Pros
- Simplifies payments through one loan or balance transfer
- Zero-interest cards offer short-term relief from interest
- Consolidation loans often provide lower, fixed rates
Cons
- Requires fair to good credit for better terms
- Balance transfer credit cards revert to the original standard APR for purchases or cash advances after promo periods end
- Loan costs may offset savings if rates stay high
Cost
You may be charged a transfer or convenience fee of 3% to 5% for your initial balance transfer when you open a new card and transfer funds. Additionally, some cards may charge a low interest rate (1.99% to 6.99%) instead of zero percent interest during the initial promotional period, so it’s essential to read the contract carefully.
Calculating the cost of a consolidation loan depends on your new interest rate. You’ll need to determine if paying this rate over the entire length of the loan results in less interest than paying off your debts individually.
Stats
- Louisiana residents have an average credit score of 680, placing them firmly in the “good” category.
- Having a strong credit score suggests that many consumers will likely qualify for more favorable interest rates when securing a consolidation loan.
Resources
Here’s an in-depth look at the pros and cons of debt consolidation loans.
Debt Settlement
By negotiating with creditors on their own or with the assistance of a debt settlement organization, Pelican State residents can often significantly reduce their debt payments through this method.
How It Works
Consumers with large unsecured debts can enroll these balances with a debt settlement organization. In return, they negotiate with creditors a lump-sum payment at a reduced amount compared to what you currently owe in return for waiving or “forgiving” the remaining balance and settling the account in full.
Once your lender agrees to accept this lump-sum payment, you’ll begin adding money to a savings account to pay off your debt all at once after you’ve collected enough.
Pros
- Can cut total unsecured debt by up to half before fees
- Shorter path to debt freedom compared to repayment plans
- Alternative to bankruptcy that comes with lasting impact
Cons
- Credit score drops during the process
- Creditors not required to accept settlement offers
Cost
Debt settlement companies charge fees based on the amount of debt you enroll. These fees range from 15% to 25% of the total debt you enroll in the debt settlement program.
Stats
- Over 18,000 Louisiana residents enrolled in some kind of debt settlement program in 2023.
Resources
Decide if debt settlement is the best solution for your financial situation.
Bankruptcy
Declaring bankruptcy is the last option for Louisiana residents who’ve tried other debt relief methods to no avail.
How It Works
It’s a good idea to consult a bankruptcy attorney first to determine your options. Individuals typically file either Chapter 7 or Chapter 13 bankruptcy to discharge debts and restructure payments, pending approval from the state court system.
Pros
- Eliminates or restructures most unsecured debts
- Stops creditor collection and wage garnishment
- Offers a financial reset for those unable to repay
Cons
- Damages credit for up to 10 years
- Legal and court fees can be costly
- Difficulty to obtain new credit or sign up for new mortgage loans, apartment leases, and utility accounts
Cost
When you declare bankruptcy, you’ll pay court fees and attorney fees that can cost up to $4,500, depending on the attorney you choose to work with.
Stats
- In 2023, a total of 9,175 Pelican State residents filed for some form of bankruptcy (PDF).
Resources
Discover more about the ways bankruptcy affects your finances before you choose this option.
What You Need To Know About Debt in Louisiana
Statute of Limitations on Debt Collections in LA
The Pelican State’s Statute of Limitations on Debt Collections governs how long a creditor can pursue a consumer in court to file a claim for an unpaid debt. Each type of debt varies in the length of time a creditor can use legal action to collect money from a debtor.
Louisiana has some of the longest statutes of limitations in the country when it comes to the collection of debts.
Here’s a look at Louisiana’s Statute of Limitations by type of debt:
| Type of Debt Agreement | Length of Time Collectible |
|---|---|
| Written Contracts | 10 years |
| Promissory Notes | 10 years |
| Open-Ended Accounts | 3 years |
| Oral Agreements | 10 years |
| Medical Debt | 10 years |
“Louisiana has some of the longest statutes of limitations in the country when it comes to the collection of debts,” shares Brad Reichert, the founder and managing director of Reichert Asset Management LLC.
“While several states match Louisiana’s 10-year length of time to collect on written contracts and promissory notes, only Vermont (14 years), Kentucky, and Ohio (each 15 years) allow a longer length of time to collect on these kinds of debts,” Reichert adds.
Student Loan Forgiveness in Louisiana
While Louisiana doesn’t offer a state-led student loan forgiveness program, residents may qualify for the federal Public Service Loan Forgiveness Program.
Resources for Financial Assistance in Louisiana
Even though Louisiana stimulus checks are no longer issued, residents can still find assistance through other state and federal programs, including the following:
- Supplemental Nutrition Assistance Program: The SNAP program provides food assistance to Louisiana families facing financial hardship.
- Family Independence Temporary Assistance: Families in need can access emergency cash to support their children through this program.
- Child Care Assistance: Louisiana’s Child Care Assistance for Families helps low-income families find child care while working or attending school.
Learn more about financial assistance for Louisiana residents.
Get Professional Help Paying Off Debt
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