Santa Fe Bankruptcy Lawyer
2205 Miguel Chavez Rd., Suite A, Santa Fe, N.M. 87505
Tami Schneider, Bankruptcy Attorney
Santa Fe, New Mexico
Chapter 7 Bankruptcy Basics
A Chapter 7 bankruptcy filing immediately creates an ‘automatic stay’. This stops garnishments, court cases, creditor harassment/phone calls, foreclosures, court ordered house sales and car repossessions.
Chapter 7 can be used to discharge both personal and business debt. Chapter 7 is the simplest, quickest and most common form of bankruptcy.
A Chapter 7 bankruptcy gets rid of most unsecured debt, provided that the charges are more than 90 days old. Unsecured debt includes credit cards, medical bills, pay-day loans, signature loans and court judgments for the same. Judgment liens can be lifted from your real estate.
Chapter 7 Bankruptcy allows you to choose what you want to do about your secured debt (i.e. automobile loan, home mortgage). You can eliminate the secured debt by surrendering the secured property, or you can keep your secured property. An automobile lender/lien-holder can require you to sign a reaffirmation agreement to keep your motor vehicle. The terms will be the same as your original agreement. If you sign a reaffirmation agreement and fail to make the payments, you can be sued after the bankruptcy. No reaffirmation agreement is required if you want to keep your house.
Certain debts will survive a Chapter 7 bankruptcy and cannot be eliminated. These include, child support, alimony, debts incurred by fraud, criminal penalties, debts incurred while DWI, intentional bad acts, debts less than 90 days old and some tax debts. Personal income tax debt from late filed or non-filed tax returns cannot be discharged in New Mexico. Recent tax debt for taxes due less than three years ago also cannot be discharged, even when the tax return forms are filed on time. Student loans are rarely dischargeable for ‘undue hardship’.
Most people who file Chapter 7 Bankruptcy are permitted to keep all of their property. (Property not exempt and not abandoned by the bankruptcy trustee must be surrendered.) During your free consultation I will review your real and personal property with you to make sure that it can be exempt/protected.
New Mexico residents may choose either the New Mexico or the federal exemption list of property to keep. The New Mexico homestead exemption for your residence is $60,000 equity or $120,000 equity for married couples. (Equity is the amount that would be left in your pocket if you were to sell your house and pay off your mortgage.) Other NM exemptions (protected property) include: $4,000 equity in one car per debtor, pensions, household goods and furnishings, clothes, tools of the trade $1,500, jewelry $2,500, medical equipment used for the health of the debtor, cash surrender value of life insurance, public benefits.
Income guidelines determine your eligibility for Chapter 7 Bankruptcy, where the debts are primarily consumer debts . (No means test is required if the majority of your debt is business debt.) If you earn less than the median income for the state in which you reside, you qualify. If you earn more, a means test will determine your eligibility to file. The median income for New Mexico residents fluctuates, but hovers around $45,000 for a single person, $54,000 for a married couple, $58,000 for a married couple with one child and $67,000 for a family of 4. Your last six months of income times two determines your yearly income. Income includes your job pay, pension withdrawals, pension payments, rents received from renting real estate, net business income and regular monthly gifts from family.
Social Security is not counted in the means test.
Many people still qualify for Chapter 7 when their income is over the median income. This depends on a number of factors calculated by the means test, such as mortgages and car loans. It is important to do a means test before you do a pension withdrawal, to avoid potentially disqualifying yourself from filing for six months.