New Mexico bankruptcy laws: What are the Laws Regarding Bankruptcies in the State of New Mexico
Businesses and individuals who are unable to pay the debts file for bankruptcy. Bankruptcy is the interest paid on the regrets of yesterday and borrowing the troubles of tomorrow in advance.
It no longer has the stigma it once did. In the present world, bankruptcy is considered a wise way to get rid of the financial troubles and to restart life.
New Mexico bankruptcy laws
Federal bankruptcy laws govern New Mexico. Every individual who files bankruptcy under the U.S. Bankruptcy law of 2005 has to undergo credit counseling. The debtor has to undergo credit counseling within six months before filing bankruptcy. The debtor also has to complete a structured financial management instructional course after filing bankruptcy.
Means test in New Mexico
The means test determines whether the debtor qualifies to file under chapter 7 bankruptcy or chapter 13 bankruptcy, under the federal bankruptcy law of 2005. The analysis only applies to high-income filers. The court will analyze the debtor's income and expenses to qualify for this test. If the income of the debtor is less than the median income of the state of New Mexico, the debtor may file under chapter 7. If the average income of the debtor is more than the median income of New Mexico state, then the debtor has to take the means test. The test will determine whether the debtor can pay back a portion of the unsecured debts through chapter 13 bankruptcy.
Chapter 7 bankruptcy
Chapter 7 bankruptcy works well with people with low income and minimal property. A trustee is appointed who liquidates all of the debtor's assets and property that is not exempt under New Mexico exemption law. The proceeds of the liquidated assets and wealth are distributed to the creditors, and the debtor's debt is cleared. A part of the proceeds is given to the debtor to start fresh, and the trustee takes another part as commission. Chapter 7 discharge will wipe out the debtor's loans, credit card balances, and medical bills, but not taxes, support obligations, and student loans. The debtor is allowed to keep some essential assets.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is for high-income filers who can afford to pay full or part of the debt in the future. Under chapter 13, the debtor makes a promise to pay a part or whole of the debt using future income. The debtor signs a voluntary repayment agreement. If the debtor does not deviate from the terms of the agreement, the remaining dischargeable debts are released upon completion of the term of the agreement.
Chapter 13 is beneficial to those who want to
- prevent a house foreclosure
- make up missed car or mortgage payments
- pay back taxes
- avoid interest accumulation on tax debt
- keep valuable non-exempt property; and more
Only those individuals who have a steady income and have disposable income can file under chapter 13 bankruptcy.
New Mexico bankruptcy exemption
Four exemptions apply in the state of New Mexico.
- Homestead exemption: protects equity in a residential home
- Motor vehicle exemption: is to preserve equity in a car, motorcycle, truck or other vehicles.
- Wildcard exemption: lets the debtor select the specific property which he/she couldn't protect otherwise.
- Federal exemption: The debtor is given a choice between state and federal exemption laws. If the debtor chooses the state bankruptcy exemption, he/she can use the federal non-bankruptcy exemptions.
Bankruptcy is a tedious process. Though it may be difficult to file bankruptcy without an attorney successfully, it is not impossible. It is suggested that a competent attorney is consulted before filing bankruptcy. Self-represented filers are required to be familiar with the U.S. bankruptcy code, federal rules, and procedures and the local rules of the New Mexico court.