Common Myths about Bankruptcy in New Mexico

Recent events have caused businesses and individuals to assess and struggle with their financial situation more than perhaps any time in decades. For many, despite attempts by the government to assist, bankruptcy is a consideration. Here are some common myths about bankruptcy and some myth-busting by our Bankruptcy attorney Ron Holmes.

MYTH 1: I should exhaust all my resources and options and consider bankruptcy only as a last resort.

NOT TRUE.  Every situation is different, and as you assess your financial situation and find you can no longer meet your debt obligations, it might be wiser to consider bankruptcy before taking actions that might adversely impact you especially assets that might be protected in Bankruptcy.

MYTH 2: Filing bankruptcy will ruin my credit.

NOT TRUE. Filing bankruptcy will put you on the path to rebuilding your credit. The fact is, you are more likely to get credit after you file for bankruptcy, than if you choose not to file. Initially, banks, credit card companies and other lenders will want more money down, and will charge higher interest rates. If you pay your bills on time, start saving money and do the things that would typically help your credit score, it will start to improve. You only have up to go.  Clients of our experienced bankruptcy attorney have been able to purchase cars and trucks almost immediately after finishing their bankruptcy and sometimes during the bankruptcy.

While a Chapter 7 bankruptcy can remain on your credit report for ten years, your ability to borrow and your credit may actually increase since you will no longer struggle to pay bills that you cannot afford.

MYTH 3: I will lose everything I own if I file bankruptcy.

NOT TRUE. Most of our chapter 7 New Mexico clients do not lose anything. Every state has exemptions that protect certain kinds of property. In New Mexico, there are exemptions to protect such things as your house, your cars, household goods and furnishings, IRAs, retirement plans, and a number of other things. In New Mexico, you also have the choice of using the federal exemption statutes instead of your New Mexico exemptions. Even in a chapter 13 New Mexico bankruptcy, in the rare case where you have more property than can be protected through the exemptions, you can typically keep this property by paying a higher chapter 13 plan payment.

However, filing bankruptcy does not generally release or get rid of mortgages or liens against your property. Therefore, if you want to keep a car, truck, home or business equipment that serves as collateral for a loan, you need to keep paying on the debt. If losing personal property is a concern, our experienced New Mexico bankruptcy attorney, Ron Holmes, will help you keep these items and make the right decision regarding secured debt.

MYTH 4: Filing bankruptcy makes me a bad person.

NOT TRUE. Everyone wants to pay their bills, and everyone needs to take care of their family, but when you can’t do both, bankruptcy is there to help. Getting rid of certain debts frees up money to allow you to better take care of your family.

There are many good reasons why over 1 million families will file bankruptcy this year. The economy is still in upheaval. Job losses, medical difficulties, family emergencies, bad decisions, or failed businesses happen to even the best prepared. The bankruptcy laws exist for precisely this reason: to help you through these difficult times and give your family a “fresh start.”

MYTH 5: It is really difficult to file for bankruptcy.

NOT TRUE. The decision to file may be hard, but once the decision is made, and with our firm’s help, filing bankruptcy is easy.

At Davis Miles McGuire Gardner, your case is overseen by native New Mexican Ron Holmes, a former Bankruptcy Trustee, who has currently serves on the Bankruptcy Section Board of Directors.

MYTH 6: Creditors will continue to harass me after I file bankruptcy.

NOT TRUE. When your bankruptcy is filed, the Bankruptcy Court issues an order telling all of your creditors stop contacting you. This is called the “automatic stay”. This prohibits creditors from pursuing collections efforts and requires them to cease contact. If a creditor violates the automatic stay, you can bring an action against the creditor.

MYTH 7: Everyone will know I filed bankruptcy.

NOT TRUE. Although a bankruptcy filing is a matter of public record, it is likely that the only people who will know are the creditors you list in your bankruptcy and people you tell. Unless someone has a specific reason to try and track down information on you it is very unlikely that anyone will know you have filed a New Mexico bankruptcy.

MYTH 8: You can only file for bankruptcy once.

NOT TRUE. Although there are various restrictions on being able to file for bankruptcy again, it is possible to file more than once. Though there may be consequences to filing a second time, you do not become ineligible to file for bankruptcy just because you have had to file for it once before. The restrictions and consequences of filing a bankruptcy more than once are specific to your situation.

MYTH 9: I will never be able to own anything again.

NOT TRUE. The truth is that you can buy and own whatever you can afford once you get your discharge in bankruptcy, and keep much of the property you have.

MYTH 10: If I file I will lose my house, my car and my retirement savings.

NOT TRUE. Because of several exemptions built into the bankruptcy law, most people who file for bankruptcy protection do not lose any property at all. In New Mexico, there are exemptions that apply to these items.

MYTH 11: I can’t get rid of back taxes through bankruptcy.

NOT TRUE. The truth is, it depends on what type of taxes you have and how old they are. Income taxes more than 3 years old can be discharged under certain circumstances. There are a few qualifications that have to be met, but if those are met, you can discharge certain taxes.

By the same token, there are certain taxes that you cannot discharge. Ron Holmes can explain these issues in greater detail during your initial free consultation.

MYTH 12: If I am married my spouse and I must both file bankruptcy.

NOT TRUE. We have filed numerous cases where one spouse or the other, but not both, filed bankruptcy. In many cases, where husband and wife both have a lot of debt, it makes sense and saves money for them to both file, but it is not required. In some cases, there is no reason for the other spouse to file, and there may be important reasons not to file for a particular spouse.

MYTH 13: I can pick and choose which debts and property to list in bankruptcy.

NOT TRUE. You must list all your property and debts. Often a client will want to omit a debt because they intend to keep paying it. Repaying a debt after bankruptcy is okay, but failing to list debt or item of property is not.

MYTH 14: I will lose my job because I filed bankruptcy.

NOT TRUE. Employers are not allowed to fire someone or refuse to hire someone for filing bankruptcy.