The sky is big in New Mexico, the land is rich with red earth and the vistas are beautiful with jagged rocks, majestic mountains, and sandy deserts. New Mexico has the highest percentage of Hispanics, making this state a home away from home.

But what happens when your home, your livelihood, and everything you enjoy about your life is threatened? When creditors start calling and harassing you, or your bank account has been frozen, you may feel like your life is spinning out of control. Save your home from foreclosure, stop creditors calling you and your family, and keep the car. Hundreds of New Mexican residents have filed for Chapter 7 bankruptcy, allowing them to go back to living the way they wanted.

How Does a New Mexico Chapter 7 Bankruptcy Work?

Myth and hype often surround all types of bankruptcy; however, a Chapter 7 bankruptcy has assisted a number of New Mexicans in getting a fresh start. Also known as a liquidation or straight bankruptcy this process allows debtors to discharge most or all of their debts. From the time debtors file a bankruptcy petition until they receive the final discharge document, the entire process takes around six months to complete.

The basic steps to file for bankruptcy include:

• Meet and consult with a local New Mexico bankruptcy attorney.
• Bring your financial information. Most attorneys will ask for:
• Last 6 months of pay stubs for you and your spouse.
• Your last filed tax return.
• A complete list of all creditors you owe money to. (This includes personal loans, and loans by friends and family members.)
• Provide any additional financial information that your lawyer requests.
• File your petition. (Your attorney will electronically file the right bankruptcy documents, along with notifying your creditors of your bankruptcy.
• Complete the debtor’s education courses.
• Attend the “Meeting of Creditors.”
• Supply additional financial information as needed.
• Wait for your discharge document.

The Bankruptcy Reform Act of 2005 mandates all individuals filing for bankruptcy, Chapter 7 or otherwise to take two courses on credit counseling and finance management; one before you file for bankruptcy, and one after. Both courses take approximately 90 minutes to complete and must be taken from an approved institution. Your attorney will recommend an education company to take the required courses.

After you have taken the first course and filed your petition, you will be required to attend a short hearing with your attorney about your bankruptcy. A judge will be present along with a trustee who acts as a representative of your creditors. Typically your creditors will not be present at your bankruptcy hearing. Both the judge and the trustee will ask you a few short questions, which your bankruptcy attorney will discuss with you prior to your hearing. The entire hearing should take approximately 10 to 15minutes.

Meeting the Qualifications for a Chapter 7 Bankruptcy in New Mexico

A Chapter 7 bankruptcy immediately stops creditor harassment and can allow you to discharge your debts, but not everyone can qualify. In order to qualify for Chapter 7 in New Mexico a resident must either fall below the median income level or pass the means test. The average income based on family size is as follows:

• 1 individual – $37,274
• 2 individuals – $51,855
• 3 individuals – $52,303
• 4 individuals – $53,709

If your family size is larger than four members, debtors wishing to file for bankruptcy must add $7,500 per person to the base income level. (Please note that these income levels can and do change from time to time.)

For those that have income levels higher than the state average, additional financial information will be required in order to pass the means test. This test is a method which mathematically determines an individual’s financial status. It will show whether a Chapter 7 bankruptcy is the best course of action for you. If you do not qualify by passing the means test, your bankruptcy attorney may recommend a Chapter 13 bankruptcy.

What About My House?

Another myth about Chapter 7 bankruptcy is that once you file, your creditors or the court will take everything you own. Bankruptcy law mandates that a certain number of exemptions are provided so that debtors can start their life after bankruptcy with relative ease. In New Mexico, filers are allowed to claim either state or federal exemptions. Having this variety allows those filing to save the most property and assets, by tailoring the exemptions according to personal need. The state exemption laws in New Mexico include:

• Homestead Allowance – Up to $60,000 in a homestead exemption which serves as a primary residence OR $5,000 in personal property.
• Vehicle – A single vehicle worth up to $4,000 is exempt.
• Home Goods – All personal goods including:
• 100% Clothing
• 100% Furniture
• 100% Personal medical or health equipment
• 100% Books
• 100% Appliances
• 100% of up to $500 in cash
• Pensions – 100% of pension income for the following employees
• Judges
• Magistrates
• State police
• Medal of Honor pension exemption (for all Army, Navy, Air Force or Coast Guard Honor roll employees)
• Benefits – Includes 100% of the following:
• Educational retirement benefits
• Worker’s compensation
• Veteran’s Administration benefits
• Military Survivor Benefit Plan annuities
• FEMA benefits
• Occupation disease and disablement compensation benefits
• Unemployment benefits
• Social Security
• Public safety officer’s death benefits
• Insurance – Includes 100% of all of the following insurance policies
• Cash surrender value of a life insurance policy
• Proceeds of life insurance policies
• Crop insurance proceeds
• Federal homestead lands and debts contracted before the insurance of the patent
• Railroad unemployment insurance

The amount and type of exemptions offered by the New Mexico bankruptcy court can change annually. It is important to check with your bankruptcy attorney for the most recent changes on exemption laws.

Do what many other New Mexican residents have already done for themselves. Contact a local bankruptcy lawyer today to find out how you can get rid of your debt once and for all.

Albuquerque Bankruptcy Court