What Should You Do Before You File for Bankruptcy in New Mexico?

Filing for bankruptcy is not a decision to be made lightly. It is oftentimes the result of a complicated legal and financial situation that has you overwhelmed and feeling like you are out of options. However, filing for bankruptcy can be the start of securing your financial future on your own terms. With the help of an experienced New Mexico bankruptcy lawyer, you can discover your options and make an informed decision for yourself.

What Is Bankruptcy?

Bankruptcy is a legal status that occurs when a person or business is unable to repay their outstanding debts or any other financial obligations. It gives people in serious debt a fresh start and allows creditors to regain some of the money they are owed via a liquidation of the debtor’s valuable assets. Depending on your circumstances, making the decision to file for bankruptcy could be the most beneficial path to take.

Why File for Bankruptcy?

Many factors can lead a person or a business to file for bankruptcy. Some are personal, while others are out of the filer’s control. Often, unexpected circumstances can lead to a rise in debt and a need to file for bankruptcy. The COVID-19 pandemic led many businesses to file for bankruptcy due to a steep rise in debts.

Medical issues, wage reductions, the loss of a loved one, sudden but necessary expenses, and more can all be the initial cause of bankruptcy. The most important thing to do is to recognize the implications of your financial situation earlier rather than later and make a plan for your immediate financial future. This can mean filing for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 vs. Chapter 13

There are two main kinds of bankruptcy that are designed to aid a person or larger entity in debt relief. Both should be taken seriously, and it is important to consult an experienced Albuquerque bankruptcy attorney before reaching a potentially life-altering decision regarding your finances. A bankruptcy lawyer can also advise you on which type of bankruptcy may be better for you.

• Chapter 7: This is the most frequently filed form of bankruptcy. It involves liquidating any and all assets owned by the filer in order to pay off the unsecured debt. For this reason, it is also known as “liquidation bankruptcy.” In order to qualify for Chapter 7 bankruptcy in New Mexico, you must have an income that is less than the median income for a household of the same size.If you qualify for Chapter 7 bankruptcy, it is likely that all of your outstanding debt will be eliminated. This includes credit card debt, medical debt, personal loans, home foreclosures, and outstanding collections. This does not include student loan debt, spousal support, or any criminal fines you may owe to certain parties. If you have no protected assets, your bankruptcy can end in four to six months.
• Chapter 13: This type of bankruptcy is also called “the wage earner’s plan” or is referred to as “reorganization” instead of “liquidation.” Chapter 13 bankruptcy allows individuals to enter into a payment plan for their outstanding debt in place of liquidating all of their assets.This sort of bankruptcy can last between three and five years, depending on how much you have to pay back. Chapter 13 bankruptcy can stop home foreclosures and automobile repossessions, giving you the time you need to pay back the necessary parties.

FAQs

Q: How Do I Prepare Myself for Bankruptcy?

A: To start filing for bankruptcy, you must first determine whether you want to file for Chapter 7 or Chapter 13 bankruptcy, depending on how your income compares to the median income for New Mexico. Once you have determined that, you must make an itemized list of your sources of income, as well as outstanding debts, all notable assets and possessions, and any loans you may have. You should also collect at least two years’ worth of tax returns.

Q: What Is the First Step in Declaring Bankruptcy?

A: Once you have prepared yourself for bankruptcy by gathering the appropriate documentation and listing your assets and income, you will need to file several forms with the New Mexico bankruptcy court.

You can do this with the help of an experienced attorney or on your own. These forms will ask you to describe your financial situation for the past two years. Be honest. If the judge or the creditors feel you are being untruthful about your finances, it could hurt your petition and end your bankruptcy filing.

Q: What Assets Do You Lose in Chapter 7?

A: In a Chapter 7 bankruptcy claim, you will lose any nonexempt assets. This includes additional homes that are not your primary residence, expensive vehicles not covered by any bankruptcy exemptions, non-retirement investments, luxury goods, and expensive clothing or jewelry.

You can keep your home or your car if the asset is secured by a loan and you are caught up on the payments. This is a bankruptcy exemption. There is a possibility that your property can be protected by state or federal bankruptcy exemptions.

Q: How Fast Does Bankruptcy Work?

A: Once it is filed, Chapter 7 bankruptcy can normally be finalized in roughly four to six months. This is the fastest option to take for personal bankruptcy. In Chapter 13 bankruptcy, the addition of a repayment plan can make the entire bankruptcy take up to five years. However, it is all entirely subjective and depends on the case at hand. The more complicated the situation, the more difficult bankruptcy will be to finalize.

Contact a Bankruptcy Lawyer You Can Rely on

At Gilchrist Law Firm, P.C., we understand how overwhelming it can be to face the prospect of bankruptcy. If your financial situation requires bankruptcy in the near future, it is crucial to have someone on your side who understands the complexities of the process ahead. Filing for bankruptcy can be a terrifying, stressful ordeal, but it is not something you should have to face on your own. Contact Gilchrist Law Firm, P.C. today to secure your financial independence and look forward to a promising future.