What are the differences between Chapter 7 and Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 are the two most commonly used types of New Mexico bankruptcy relief. Here are the pros and cons of each one.
New Mexico Chapter 7 Bankruptcy
What It Is
A Chapter 7 bankruptcy is the simplest, easiest way to get a fresh start.
A trustee is appointed to liquidate your assets. The trustee will not liquidate certain possessions that are considered “exempt” such as your home and your car. The proceeds of the liquidation are used to pay your creditors. With a few exceptions, your remaining debt is forgiven.
The Pros
- In many circumstances, all of your assets are “exempt,” allowing you to keep all of your possessions.
- You get fast relief, as soon as the court issues its order discharging your debt, often within a few months.
- You don’t have to agree to any long-term payment plans, and your dischargeable debt is completely erased.
The Cons
- Chapter 7 filings do not permanently block foreclosure proceedings.
- If you are behind on your mortgage payments and want to keep your home, Chapter 7 will not always meet your needs.
- In addition to your home, in some circumstances, there may be other important possessions that you would be forced to give up in a Chapter 7 proceeding.
- Not everyone is eligible for Chapter 7 relief. There is a means test. The means test is based on your income and your ability to pay your debts. If your income is high, Chapter 7 relief may not be available to you.
- Even if you meet the income requirements, if you filed for Chapter 7 relief within the past 8 years, you are not currently eligible to file again.
New Mexico Chapter 13 Bankruptcy
What It Is
A Chapter 13 bankruptcy takes a different approach to debt relief. Instead of liquidation and an immediate discharge of debt, a Chapter 13 case sets up a repayment plan by which you pay back all or part of your debt over time, at a pace you can handle.
The repayment period is three to five years. Your debts are not cancelled, but are often reduced.
The Pros
- A Chapter 13 filing will, in many cases, permanently block a foreclosure on your house.
- In certain circumstances, Chapter 13 provides greater flexibility and control in holding onto important possessions, such as your home, car and other personal property.
- For individuals who don’t want their debt forgiven but do need more breathing room to manage expenses, Chapter 13 offers a practical solution.
The Cons
- A chapter 13 proceeding is more complicated and usually more expensive than a Chapter 7 case.
- Many individuals cannot afford to make the payments required by a Chapter 13 repayment plan.
- You will remain liable for a greater amount of debt for a longer period of time than you would with a Chapter 7.
At Regazzi Law, our attorneys will guide you through the process and help you determine which form of New Mexico bankruptcy relief is right for you.
Fees for New Mexico Chapter 13 and New Mexico Chapter 7 Cases
Our initial fee is the same for both types of cases. We find it’s best to start by considering Chapter 7 relief for all of our clients. If we agree that Chapter 7 is the best course for you, no additional fees are required. If we determine that you would benefit from a Chapter 13 repayment plan, there may be additional fees, but you may not need to pay those additional fees up front. Some or all of those fees may be rolled into your Chapter 13 repayment plan.
