While Chapter 7 bankruptcy petitions require debtors to allow some portion of their personal property to be liquidated to pay creditors, both federal and state laws allow some property to be claimed as exempt, or protected from such liquidation. This permits consumers to free themselves from debts they are unable to pay and begin again, hopefully with a more financially sound foundation.
In New Mexico, the filer can choose either state or federal exemptions, although they cannot mix the two. In addition, married couples filing jointly may double their exemptions, providing even more protection for their personal property.
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- New Mexico state exemption – up to $4,000
The equity a consumer owns in their car is protected up to the exemption amount they choose; however, if they still owe money on the vehicle and that loan is secured by the vehicle itself, a creditor can still repossess the car if the consumer fails to make their regular payments.
How to Keep Your Home
- Federal homestead exemption - $20,200
- New Mexico state exemption – $30,000 for an individual, $60,000 for a married couple filing Chapter 7 jointly
Even though the equity in a debtor’s home may be protected under their homestead exemption, and the debt may be erased from their credit report, if a mortgage on the property is secured by that property, the creditor still has the right to claim it through foreclosure if the homeowner fails to meet the payment terms agreed upon.
New Mexico allows exemptions for other forms of personal property:
- Clothing, books, furniture
- Jewelry – up to $2,500
- Building materials
- Any other property – up to $500
- A minimum amount of shares needed to maintain membership in a cooperative association
- Tools, machinery and materials needed to dig, drill, torpedo, complete, operate, or repair an oil line, gas well, or pipeline
- Wild card – up to $5,000 of unused homestead exemption
Filing Schedule C of a Bankruptcy Petition
Whether a resident of New Mexico chooses to claim their Chapter 7 property exemptions from the state or federal statutes, they must complete Schedule C of a bankruptcy petition in order to receive their exemptions. The required information includes:
- The property type
- The state or federal statutes that apply
- The value of the property exemption
- The current assessed value of the property (not the market value)
When to Talk to an Attorney About Bankruptcy
There are clearly some advantages to choosing New Mexico state exemptions rather than federal exemptions when filing for Chapter 7 bankruptcy. However, those advantages may not be appropriate for every debtor who files. In addition, bankruptcy is a choice with far-reaching consequences. There may be other options for relieving a debtor’s financial problems and restoring their economic balance. Bankruptcy attorneys are skilled in providing that kind of legal and financial advice. Moreover, once that decision is made, they can guide the consumer through the legal processes to a successful conclusion.
