The Basics of Filing Chapter 7 Bankruptcy

Filing Chapter 7 bankruptcy, sometimes called “liquidation bankruptcy,” cancels your unsecured debts without further repayment under New Mexico bankruptcy law. In exchange, you might have to surrender some of your property. The whole Chapter 7 bankruptcy process takes about three months, and commonly requires only one trip to the courthouse. If you are interested in reorganization bankruptcy, please see our respective webpage or the Chapter 7 vs. Chapter 13 comparison page..

If you’re thinking about filing Chapter 7 bankruptcy, you’ll probably want to know what property you’ll be able to keep. Both federal and New Mexico bankruptcy law may allow you to keep your homestead, your automobile, household furnishings, and other basic items. These items are called “exempt property,” and the laws that specify what property is exempt are called “exemption statutes.” In the overwhelming majority of bankruptcies filed by individuals in Albuquerque, New Mexico, all (or virtually all) of the debtor’s property is exempt.

Filing for Chapter 7 bankruptcy puts into effect what is called the “automatic stay.” The "automatic stay," in New Mexico bankruptcy law, immediately stops your creditors from trying to collect what you owe them. Thus New Mexico bankruptcy law protects you so, at least temporarily, creditors cannot legally empty your bank account; go after your car, house, or other property; or cut off your utility service.

Until your Chapter 7 bankruptcy case ends, your financial problems are in the hands of the New Mexico bankruptcy court. It assumes legal control of the property you own (except your exempt property, which is yours to keep) and the debts you owe as of the date you file. Nothing can be sold or paid without the court’s consent. The court exercises its control through a court-appointed person called a “bankruptcy trustee.” The trustee is mostly interested in what you own and what property you claim as exempt. This is because, in New Mexico bankruptcy law, the trustee’s primary duty is to see that your creditors are paid as much as possible on what you owe them.

If you’ve pledged property as collateral for a loan, the loan is called a secured debt. The most common examples of secured debts under New Mexico bankruptcy law are mortgage loans and auto loans. In most cases, you’ll either have to continue to pay for the collateral according to the loan agreement or surrender it to the creditor. If a judgment creditor has recorded a lien against your property, that debt is also secured. You may be able to wipe out a judgment lien in chapter 7 bankruptcy.

If you’re a party to a contract or lease, you may choose to cancel (or reject) the contract or lease without further payment. Alternatively, you may choose to accept (or assume) the contract or lease by continuing to honor the terms of the written agreement.

At the end of the bankruptcy process, the debts that qualify for discharge are wiped out by the court. You no longer legally owe such debts. You can’t file for Chapter 7 bankruptcy again for another eight (8) years after filing for Chapter 7 bankruptcy the first time.

If you’re deeply in debt, filing Chapter 7 bankruptcy may seem like a magic wand. But there are drawbacks. Bankruptcy can be intrusive. New Mexico bankruptcy law requires you to disclose your prior financial activities as well as your current property holdings, allowing the trustee to look for anything of value that the law allows to be taken and sold to pay your creditors.

You should consult a New Mexico bankruptcy law attorney from the Law Office of Michael Danials before deciding whether filing chapter 7 bankruptcy is the right choice for you. Call us today to set up a meeting to go over your financial situation and guide your through New Mexico bankruptcy law.