Are you considering filing for bankruptcy in New Mexico? If so, you’re probably feeling stressed and overwhelmed. Bankruptcy can be a complicated process, but it’s important to understand your options to make the best decision for your situation. In this blog post, we’ll provide an overview of the bankruptcy process in New Mexico to help you determine whether or not bankruptcy is the right choice for you.
What Is Bankruptcy?
Bankruptcy is a legal procedure that allows debtors to discharge their debts and get a fresh start. When you file for bankruptcy, all collection activities, such as wage garnishments, foreclosures, and repossessions, are automatically halted. The creditors are therefore prohibited from collecting your debts.
Reasons to Consider Filing for Bankruptcy
There are a variety of reasons why you might think to declare bankruptcy. In many cases, bankruptcy is the result of falling behind on debt, struggling to repay loans, or using credit cards excessively.
Other reasons to consider bankruptcy include:
- Being harassed by creditors
- Being threatened with foreclosure on your home
- Being behind on your debt payments
A bankruptcy lawyer can help you if you fall into any of these situations.
Alternatives to Bankruptcy
Making the decision to file for bankruptcy can be difficult. Before making any major financial decision, it is important to know your options.
Credit counseling and debt settlement are good alternatives to bankruptcy. Nevertheless, consulting a financial advisor before making any major decisions is always advisable.
You can reduce your interest costs and repay your debts more quickly by consolidating your debts. Lastly, it is always worthwhile to negotiate with creditors. A successful agreement can prevent bankruptcy, despite the complexity of the process.
The Types of Bankruptcy for Individuals
There are two types of bankruptcy that individuals can file in New Mexico: Chapter 7 and Chapter 13.
Chapter 7
Chapter 7 bankruptcy, or liquidation bankruptcy, allows you to discharge or get rid of certain types of debt. This is usually the first option considered since it is cheap and can be completed quickly since creditors don’t get paid. However, this type of bankruptcy is mainly suitable for people with few assets as people with more assets can risk losing them when filing. Furthermore, there are no payment plans for catching up on mortgage or car payments if you are delinquent at the time of filing.
Chapter 13
In contrast, Chapter 13 debtors have the chance to repay their debts within three to five years. Unlike Chapter 7 bankruptcy, Chapter 13 lets you keep all your property and avoid foreclosure. It is also possible to force a creditor to accept a payment plan if the debt cannot be discharged in bankruptcy.
How to File for Bankruptcy in New Mexico
If you are considering filing for bankruptcy in New Mexico, it’s important to know the steps involved. The steps to take have been detailed below.
- Gather Your New Mexico Bankruptcy Documents: This includes copies of your tax returns for the past two years and your last 60 paycheck stubs.
- Sign Up for a Credit Counseling Course: Find course information here.
- Fill Out the Bankruptcy Forms: You can download the forms free through USCOURTS.gov.
- Pay the Filing Fee: You must pay $338 to file for bankruptcy under Chapter 7. If you earn less than 150% of the poverty guidelines and cannot afford the filing fee, you can request a fee waiver.
- Print the Bankruptcy Forms: Use black ink to print all forms on white, 8.5″ x 11″ paper.
- File the Forms With the New Mexico Bankruptcy Court: Prepare and submit Chapter 7 bankruptcy case petitions, statements, and schedules electronically through the online (ESR) system. Your signature pages, filing fee, and other required forms must be submitted in person at the courthouse.
- Mail Documents to Your Trustee: After filing for bankruptcy, you will be assigned a trustee.
- Take Another Course: Take a debtor education course within 60 days after the 341 meeting.
- Attend Your 341 Meeting: Your creditors will attend this meeting and ask questions.
What Happens Post-Bankruptcy?
In bankruptcy, most unsecured debts are forgiven, so you won’t have to pay them back. There are, however, certain types of debt that cannot be forgiven through bankruptcy, including student loans, child support, and alimony. A bankruptcy filing may also result in the forfeiture of some belongings.
Can Bankruptcy Impact Your Credit?
In general, bankruptcy affects your credit score for seven to ten years. Therefore, you may have difficulty getting a loan or credit line in the future.
Rebuilding Your Credit Score Post Bankruptcy
Bankruptcy is not a financial death sentence, despite what many people believe. Credit can be rebuilt by:
- Making on-time payments.
- Keeping a good payment history.
- Getting a secured credit card.
- Becoming an authorized credit card user.
- Applying for a small loan.
- Reviewing your credit report for errors often.
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