Chapter 7 bankruptcy is often called a “fresh start” bankruptcy. It allows individuals and married couples to eliminate many types of unsecured debt and move forward without the burden of overwhelming financial obligations.
If you are struggling with credit cards, medical bills, personal loans, or wage garnishments, Chapter 7 bankruptcy may provide relief under federal law while using New Mexico exemption rules to protect certain property.
Chapter 7 bankruptcy is a liquidation bankruptcy under the United States Bankruptcy Code. In most consumer cases, no property is actually taken or sold. Instead, a court-appointed Chapter 7 trustee reviews your financial situation and determines whether any non-exempt assets exist.
At the end of the case, qualifying debts are discharged, meaning you are no longer legally required to pay them.
Most individuals must pass the bankruptcy “means test” to qualify for Chapter 7. The means test compares your household income to the median income for New Mexico and considers certain allowed expenses.
Even if your income is above the median, you may still qualify depending on your specific financial circumstances. Eligibility is determined on a case-by-case basis.
Chapter 7 bankruptcy can eliminate many common types of unsecured debt, including:
Some debts are generally not dischargeable, such as most student loans, recent taxes, child support, and alimony, although there are limited exceptions.
New Mexico law provides exemptions that allow debtors to protect certain property in a Chapter 7 case. Commonly protected property may include:
Proper use of exemptions is critical. A bankruptcy attorney can help ensure assets are correctly claimed and protected.
A typical Chapter 7 case involves the following steps:
Most Chapter 7 cases are completed within three to four months.
Every financial situation is different. Before filing bankruptcy, it is important to understand your options and the potential consequences.
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 7 bankruptcy is appropriate for your situation.
Contact our office to schedule a consultation.