Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also known as liquidation. This type of bankruptcy allows the debtor to get rid of different types of debt and is most commonly used for unsecured debts like credit card bills, and medical bills. Chapter 7 bankruptcy requires that the debtor’s nonexempt assets be sold to satisfy creditors. In many cases a debtor can exempt all their property so that there is nothing to sell, this is commonly referred to as a no-asset Chapter 7.
Determining the property that can be kept through a Chapter 7 is something one of our expert Albuquerque bankruptcy attorneys can assist you with. New Mexico bankruptcy allows for two different sets of bankruptcy exemptions. A debtor can choose between New Mexico state exemptions or can use the federal exemptions. Choosing the right set of exemptions can make the difference between whether a debtor gets to keep certain property, and is yet another reason to consider hiring an Albuquerque bankruptcy lawyer to handle your bankruptcy.
Chapter 7 bankruptcy is completed within a short time frame and most individuals have no property subject to sale. Most Chapter 7 bankruptcies in New Mexico are over within about 4 months. Between 20 to 40 days after the filing of a bankruptcy, the debtor must appear at a meeting of creditors as required under the bankruptcy code. At this meeting the debtor will be asked questions under oath by the Chapter 7 trustee (the Chapter 7 is basically a representative of your creditors). After the creditors meeting, the Chapter 7 trustee files a report indicating whether or not there are assets subject to liquidation. There is an objection period that must pass before the bankruptcy judge reviews the petition and enters a discharge order (see our bankruptcy discharge page for more info). In short, a Chapter 7 bankruptcy is a quick way to get rid of lots of debt.
Chapter 7 Bankruptcy Qualifications in New Mexico
Chapter 7 bankruptcy in New Mexico may not be available for everyone. Debtors above the median household income will have to take the means test.
Median Household Income for New Mexico after 5/1/2013
The means test was introduced to the bankruptcy process in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). The means test uses allowable expenses (which come from IRS standard allowances) to determine if a debtor has enough disposable income to pay creditors back (and if so, it requires the debtor to file a Chapter 13 or indicate special circumstances). Having an experienced bankruptcy attorney to assist you with the means test can make the difference between whether you have to file a Chapter 7 or a Chapter 13.
New Mexico allows a debtor to use either New Mexico exemptions or Federal exemptions. Generally, New Mexico exemptions are better to use when a debtor has lots of equity in their home. When a debtor has little equity in their home, the federal exemptions are usually preferred because of the “wildcard”.
Below are tables of the different sets of exemptions. Please note that these amounts are constantly increasing and these numbers are only accurate for a period of time; be sure to double check any the amount listed below, as they may not be updated.
NEW MEXICO BANKRUPTCY EXEMPTIONS
|ASSET||EXEMPTIONS||NMSA 1978 SECTION|
|Homestead (your home)||Married, widowed, or supporting another may claim real property up to $60,000 (joint owners can double this)||42-10-9|
|Insurance||- Benevolent Association benefit up to $5,000
- Fraternal benefit society benefits
- Life, accident, health or annuity benefits, withdrawal or
- cash value, if beneficiary is a New Mexico citizen
|42-10-4, 59A-44-18, 42-10-3|
|Miscellaneous||- Ownership interest in an unincorporated association
- Property of business partnership
- Workers’ Compensation
|Pensions||- Pension or retirement benefits
- Public school employees
|42-10-1, 42-10-22, 2-11-42A|
|Wages||Minimum of 75% of your earned but unpaid wages, or more for low income debtors in bankruptcy||35-12-7|
|General||- $500 worth of any personal property
- $2,000 worth of any property in lieu of your homestead
FEDERAL BANKRUPTCY EXEMPTIONS
|ASSET||EXEMPTIONS||11 U.S.C SECTION|
|Homestead (your home) / Real Property||Up to $22,975||522(d)(1)|
|One (1) Motor Vehicle||Up to $3,675||522(d)(2)|
|Household Goods and Clothing||Up to $12,250||522(d)(3)|
|Jewelry||Up to $1,550||522(d)(4)|
|Unused homestead value (aggregate of interest in any property, not exceeding $1,075 + up to $10,125 of unused value from homestead exemption)||Up to $11,200||522(d)(5)|
|Tools of your trade||Up to $2,300||522(d)(6)|
|Life insurance policies (Unmatured)||Exempt if needed for support||522(d)(7)|
|Life insurance cash/loan value||Up to $12,250||522(d)(8)|
|Prescribed health aids||Exempt if needed for support||522(d)(9)|
|Social Security, unemployment, public assistance,veterans’ benefits, disability, alimony, and child support.||
- Exempt if needed for support
|Wrongful death, life insurance proceeds, and loss of future earnings payouts||
- Exempt if needed for support
|Retirement accounts (as defined by the Internal Revenue Code)||Up to $1,245,475||522(d)(12)|