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CHAPTER 7 BANKRUPTCY VERSUS CHAPTER 13 IN NEW MEXICO
Which option is better for me: Chapter 7 or Chapter 13?
Generally, a Chapter 7 bankruptcy may be more beneficial for you than a Chapter 13,
if it is available to the individual. The main reason is the time factor behind a
Chapter 7. A Chapter 7 is quicker, being able to be completed a few months after
filing; whereas a Chapter 13 may last a full five years. The benefits that a Chapter
13 may afford -
Advantages of Chapter 7 Bankruptcy in New Mexico
The average Chapter 7 bankruptcy case is able to be planned, filed, and closed with
debt discharge within three to six months. After that time period, the person is
One major misconception in a Chapter 7 is that the person would have to lose their
property, house, vehicle(s). Although you can lose property in a Chapter 7 bankruptcy,
most individuals don’t. As long as the property is not too far behind in payments,
most filers are able to keep their property. It is important to remember that the
desire of the bankruptcy court is to give you a fresh start, and not to set you up
for failure. The law carves out a certain amount of exemptions -
It is important to note that not everyone can qualify for a Chapter 7 bankruptcy; the number one reason is a person’s income will be so high above the average family in New Mexico, that the courts force those individuals into a Chapter 13 repayment plan, where an individual would end up paying a fraction of their debt before they are given a discharge from the remainder of the debt.
Drawbacks of Chapter 13 Bankruptcy in New Mexico
A Chapter 13 bankruptcy would require an individual to form a repayment plan. This
repayment plan would end up paying some or all creditors a fraction of the debt that
was owed to them. The repayment plan would allocate monthly payments over a 3 to
5 year period. That monthly payment amount is determined by subtracting certain allowed
expenses from the total household income. These allowed expenses are all expenses
the individual or family will need to live, such as phone bills, utilities, groceries,
etc; as well as debts that will not be discharged in the bankruptcy -
The main reason people choose a Chapter 7 bankruptcy in New Mexico is that it does not require you to pay any part of your debts back, whereas the Chapter 13 does. If an individual chose the Chapter 13 bankruptcy, they would most likely need to complete the entire three to five year repayment plan in order to get the benefits of the remainder of their debt discharged. The one main advantage of a Chapter 13, when there is a choice, is in order to catch up in a residence or property that the person is substantially behind payments for.
There is a substation risk that an individual is unable to complete their plans; the majority of Chapter 13 plans to not make it to the end of their plan. Most of the time it is due to sticking to a strict monthly budget becomes too burdensome for them. As soon as a Chapter 13 plan is terminated, the debt once again begins to accrue interest at rates as high as 30%.
The only question left for most people after taking a hard look at the differences is, do I qualify for a Chapter 7?
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