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Is Bankruptcy the Right Choice for Me? (New Mexico LegalShield)
By Melissa Morris, Attorney There are many factors to consider in deciding whether or not to file a personal bankruptcy, but here are some basic guidelines to help you understand some of the process and results so you can decide whether you want to seek additional information. A. What Sort of Debts do You Have? Some debts can’t be discharged in bankruptcy. If most of your debts are this kind, it isn’t worth it to you to go to the trouble and expense of filing a bankruptcy. Examples of some debts that often can’t be discharged are: Taxes Student loans A mortgage on a house Child Support A loan on a car. Examples of some debts that usually can be discharged are: Credit card debts Medical bills Payday loans Deficiency judgments (the amount you still owe if your house or car are repossessed and sold for less than you owe the lender.) B. Which kind should I file? There are two basic kinds of bankruptcy that are used by most individuals: Chapter 7 allows you to discharge most of your unsecured debts (a secured debt is one like
your house, or your car, or some furniture, which the creditor has a right to take back if you
don’t make the payments.) Chapter 13 allows you to pay off part of all of your debts over a period of three to five
years. Which one you file will be decided by factors such as: a. If you earn more than the median income in NM, you might have to file a Chapter 13.
Median income changes as the economy changes. The current median income for
bankruptcy purposes is:
One Person family Two Three Four
$35,691 $48,870 $48,870 $53,516
b. If you own valuable property that isn’t exempt, and want to keep it, you might
have to file a Chapter 13 (An example would be if you own a vacation home worth
more than you owe on it.) C. What do I Get to Keep? Exemptions are money and property that you get to keep if you file bankruptcy. In New Mexico you can choose between the State and the Federal exemptions. Some of these are: State exemptions: $60,000 per person of equity in a residence (value of house above amount owed
on the mortgage) $4,000 per person of equity in a car. $2,500 jewelry $1,500 tools Most retirement or disability funds Federal exemptions: $15,000 per person of equity in a residence $2,500 per person of equity in a car. $1,500 tools $1,000 Many retirement or disability funds. D. What is the Effect on My Credit Score? A bankruptcy shows up on your credit report for 10 years. The effect it has on your credit score depends partially on how good or bad your score was before you filed. Most people can re-establish a decent credit score after filing bankruptcy by showing regular payments on their debts afterwards. E. Will Bankruptcy Help Me if I Can’t Make My Mortgage Payments? A bankruptcy can slow down a foreclosure, but eventually the lender will be allowed to foreclose. However, there are many programs created by the government, some of which are brand-new, that can help some people avoid foreclosure. If you are having trouble making your payments, call your LegalShield provider firm to ask if these might help you. F. The Cost of Filing Bankruptcy There are two ways an individual can file bankruptcy. The first, and least expensive, is to go to the bankruptcy court or website and follow the directions, using the forms provided by the bankruptcy court. If you are comfortable with reading instructions, filling out forms and pulling together financial information, this may work for you. You will still have to pay the court filing fee of $299 or $274 depending on the type of bankruptcy you choose. You may also hire an attorney to file the bankruptcy for you. Our LegalShield referral attorneys give a discount to LegalShield members of 25% off their usual fees. G. Additional Questions If you have more questions, please call Davis Miles. We will send you a request for information, which you should sign and return to us. After we receive it, we can discuss your bankruptcy questions or refer you to an attorney to assist you in filing a bankruptcy.