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Chapter 7 vs. Chapter 13

Law Office of Jason Cline Jan. 16, 2022

Gavel on Bankruptcy Law BooksThe financial curveballs of life can strike unexpectedly and sideline you from paying your bills, settling debts, or fulfilling your other financial obligations. When going through a difficult financial situation, Chapter 7 or Chapter 13 bankruptcy are among the promising options to help you achieve debt relief and get the clean financial slate that you deserve. An experienced New Mexico bankruptcy attorney can seek to evaluate your unique circumstances and help decide the bankruptcy chapter that is right for you.

At the Law Office of Jason Cline, I am committed to providing knowledgeable legal counsel and reliable advocacy to individuals facing complex financial problems. I can discuss your unique financial situation and help you understand your available options to achieve financial relief. Also, I can seek to enlighten you about the benefits and drawbacks of Chapter 7 and Chapter 13 bankruptcy and determine the ideal choice for your financial situation. My firm is proud to serve clients across Albuquerque, Rio Rancho, Santa Fe, Los Lunas, or anywhere throughout the state of New Mexico.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy or "liquidation bankruptcy" is designed to help individuals, families, and business owners eliminate most general unsecured debts and achieve a clean financial slate. When a consumer files for Chapter 7 bankruptcy, the New Mexico court will appoint a trustee (an independent contractor) who oversees the case. The trustee will collect and sell all your non-exempt assets.

Non-exempt assets are property and assets that can be sold in a Chapter 7 case. These include second cars, second homes, vacation homes, bank accounts, family heirlooms, cash, stocks, bonds, and other investments. The trustee will pay off some or all your creditors using the proceeds from the sale of the non-exempt assets. Also, you will be left with your exempt assets, including primary home, car, clothing, household appliances, and furniture pieces.

Who Qualifies?

To qualify for Chapter 7 in New Mexico, you have to pass the bankruptcy "means test" and attend credit counseling courses. The bankruptcy means test will evaluate your financial history, deduct expenses and payments, and determine your amount of disposable income.

What's more, you automatically pass the means test if your income is lower than the median income for your household size in New Mexico. Hence, you can file for Chapter 7 bankruptcy. Below is the median family income data for New Mexico:

  • One-person household — $47,524

  • Two-member household — $58,003

  • Three-member household — $63,213

  • Four-member household — $67,161

*Add $9,000 for each household in excess of four members.

When is Chapter 7 a Good Option?

Chapter 7 may be a good option if:

  • You own little assets

  • Your income is lower than the state's median family income.

  • You have medical bills, personal loans, and credit card balances that can be discharged.

A knowledgeable attorney can review your financial situation and determine whether Chapter 7 is the right option for you to achieve debt relief.

Chapter 13 Bankruptcy

In New Mexico, Chapter 13 or "wage earner's" bankruptcy is available to individuals earning a reasonable income but are overwhelmed with bills and debts. Filing for Chapter 13 allows you to repay some or all of your debts using your potential earnings over an extended period.

In Chapter 13, the consumer (or debtor) proposes a repayment plan – structured over 3 to 5 years – to the creditor to pay back debts using future income. Chapter 13 bankruptcy allows you to keep all – or most – of your assets, including your home and vehicles.

Who Qualifies?

You may qualify for Chapter 13 bankruptcy in New Mexico if:

  • You have a regular source of income.

  • Your income is above the state's median family income.

When is Chapter 13 a Good Option?

Chapter 13 may be a good option if:

  • You own lots of assets and intend to keep the assets.

  • You have a regular source of income.

  • Most of your debts are nondischargeable tax, student loans, or domestic support debts.

An experienced lawyer can assess your financial situation and determine whether you can achieve debt relief through Chapter 13 bankruptcy.

Hire an Experienced New Mexico
Bankruptcy Attorney

Filing for bankruptcy in New Mexico often involves a lot of complicated processes. Understanding your bankruptcy options, determining your eligibility, completing your bankruptcy forms, and attending the court proceedings can make everything even more overwhelming. Thankfully, you don't have to go through it all on your own. An experienced bankruptcy attorney can help explore your available options.

I have devoted my career to guiding and helping clients navigate the complex procedures involved in filing for bankruptcy in New Mexico. Whether you are filing for Chapter 7 or Chapter 13 bankruptcy, I will help you understand the benefits and drawbacks of each option, determine whether you qualify, and seek to guide you through the entire legal process from start to finish.

Contact my firm – the Law Office of Jason Cline – today to schedule a simple case assessment. I have the detailed legal counsel and reliable advocacy you need to navigate key decisions in your bankruptcy petition. My firm is proud to serve clients across Albuquerque, Rio Rancho, Santa Fe, Los Lunas, or anywhere throughout the state of New Mexico.