How to File for Bankruptcy in New Mexico

New Mexico is 41^st among states in bankruptcy filings, but their rate nearly doubled in the last two years.  There are many thousands more that may be considering that step in the coming months before our economy rebounds.  In New Mexico, those struggling with unmanageable debt should investigate all their options, including filing for debt relief through bankruptcy.  However, this should not be considered an easy way out.  This step remains on a person’s credit record for years, and obtaining new credit can be difficult, if not impossible for a while.  That is why it is essential to obtain solid advice when considering this option.  Generally, a bankruptcy attorney is the best source of that advice, offering both legal and financial advice throughout the process.

Finding a Bankruptcy Attorney

While there is an ever-increasing number of bankruptcy attorneys in New Mexico, finding an experienced and knowledgeable one is not always easy.  The state bar association may offer recommendations, and friends and family can offer some suggestions, as well.  There is much information available on the internet regarding a lawyer’s record and comments from those who have used them.  However, there is no substitute for one-on-one interviews with the best candidates, as well as a written rate and service quote to compare with other possible choices.

Bankruptcy Options

There are six types of bankruptcy available under the U.S. bankruptcy code, but generally, only two are chosen by individual filers.  There are significant differences between these types, and definite reasons for choosing one or the other.

• Chapter 7, or liquidation, is a form of debt relief in which a bankruptcy trustee administers the liquidation of any non-exempt property to pay creditors before debts are discharged, or erased.  Under bankruptcy reforms, a “means test” makes it more difficult to qualify for this form of bankruptcy, but those who do experience debt relief that provides them with a fresh financial start.
• Chapter 13, or reorganization, is a form of debt relief appropriate for those with enough disposable monthly income to continue to make debt payments, although on a smaller scale.  Their property is protected, since they create a debt repayment plan allowing them to pay down their obligations in three to five years.  Any that remain at that time may be eligible for discharge, as well.

New Mexico Exemptions

While those filing for Chapter 7 bankruptcy often have no assets of any significance, they often have some property that they would hope to protect.  State and federal statutes allow them to do so by claiming eligible exemptions on some types of property.  New Mexico allows filers to choose either federal or state exemptions, however, they cannot choose a combination of the two.  The state exemptions in New Mexico include:

Filing the Petition

Once the filer and their attorney make all the required choices, the debtor must attend credit counselling before filing their petition for bankruptcy.  A bankruptcy trustee is appointed by the court to:

• Analyze and administer the petition
• Determine what, if any, property should be liquidated
• Determine which debts can be discharged
• Hold a 341 meeting with the creditors, the debtor, and their attorney to allow all parties to question the filer under oath concerning their assets, obligations, and bankruptcy plan

If the petition is approved, the filer must attend debt education classes before any debts can be discharged.  The Chapter 7 filer is then free to build a new financial future, and the Chapter 13 filer fulfills their repayment plan, at which time they experience the same debt relief.