Chapter 13 Bankruptcy in New Mexico

Chapter 13 bankruptcy is a court-supervised repayment plan that can help individuals and families catch up on missed payments, stop collection actions, and reorganize debt over time. Chapter 13 is often used by people who have regular income and want to protect a home, vehicle, or other important assets while addressing past-due obligations.

What Is Chapter 13 Bankruptcy?

Chapter 13 is sometimes called a “wage earner” bankruptcy. Instead of eliminating debt immediately, you propose a repayment plan—typically lasting three to five years—based on your income, reasonable expenses, and the types of debts you owe. If the court confirms the plan and you complete the payments, you receive a discharge of qualifying remaining debts at the end of the case.

Common Reasons People File Chapter 13

Chapter 13 can be a good option in situations such as:

• Catching up on mortgage arrears to avoid foreclosure
• Stopping vehicle repossession and addressing missed car payments
• Dealing with tax debt or other priority debts through a structured plan
• Managing debt when you do not qualify for Chapter 7 under the means test
• Consolidating payments into one monthly plan payment

How the Chapter 13 Repayment Plan Works

In a Chapter 13 case, you make monthly plan payments to a Chapter 13 trustee. The trustee then distributes payments to creditors under the confirmed plan. The plan must address certain debts in specific ways, including:

• Priority debts (such as certain taxes and domestic support obligations), which generally must be paid in full
• Secured debts (such as a mortgage or car loan), which may be maintained and/or cured through the plan
• Unsecured debts (such as credit cards and medical bills), which may receive partial payment depending on the plan

Plan terms depend on the facts of your case, including income, household size, assets, and the types of debts involved.

Will Chapter 13 Stop Foreclosure or Repossession?

Filing Chapter 13 triggers the automatic stay, which generally stops foreclosure actions, repossession efforts, garnishments, and collection lawsuits while the case is pending. Chapter 13 is commonly used to catch up mortgage arrears over time while you continue making regular monthly payments going forward.

Every situation is different, and timing matters. If foreclosure or repossession is imminent, it is important to get advice promptly.

How Long Does a Chapter 13 Case Take?

Most Chapter 13 plans last three to five years. During that time, you must make plan payments and comply with plan requirements. After successful completion, the court enters a discharge order for qualifying debts.

Speak With a New Mexico Bankruptcy Attorney

Chapter 13 is more complex than Chapter 7 because it involves a multi-year repayment plan and ongoing case administration. Before filing, it is important to understand your options and the likely plan structure in your situation.

Philip J. Montoya is a New Mexico bankruptcy attorney and Chapter 7 trustee who represents individuals and families throughout the state. Consultations are available to discuss whether Chapter 13 bankruptcy may be appropriate for your goals.

Contact our office to schedule a consultation.