New Mexico Bankruptcy Exemptions and Law
Key Takeaways
New Mexico bankruptcy laws allow individuals and businesses to discharge or reorganize their secured and unsecured debts under federal court jurisdiction. Filers can choose between Chapter 7 liquidation or Chapter 13 reorganization, utilizing state or federal exemptions to protect vital personal property. This structured process triggers an automatic stay that halts foreclosures, wage garnishments, and collection lawsuits while debtors work on resolving overwhelming debt.
New Mexico’s bankruptcy laws give debtors a chance to clear their secured and unsecured debts and get a fresh start. Under New Mexico law, debtors can choose federal exemptions or New Mexico state exemptions. The bankruptcy process is handled in federal court, but state laws can determine what property is protected and the value of the exemptions.
New Mexico follows the Federal Bankruptcy Code, although New Mexico statutes provide state-specific exemptions for debtors. As a “choice” state, New Mexico allows debtors to choose either state or federal exemptions.
While other types of bankruptcy are available to businesses and agricultural interests, most debtors in New Mexico will choose between Chapter 7 and Chapter 13 bankruptcy. Let’s take a look at how each type works.
Chapter 7 Bankruptcy
Chapter 7, also called a liquidation bankruptcy, requires debtors to pass a means test. If your income falls below the median income in your state, you automatically qualify for Chapter 7 bankruptcy. If you make more than that, the court considers your living expenses and other factors to determine whether you qualify.
In a Chapter 7 case, your assets become the property of the “bankruptcy estate.” A bankruptcy trustee sells any non-exempt assets to pay off your creditors. Any remaining debts are discharged. Chapter 7 bankruptcy is preferred if you have few valuable assets and mostly unsecured debt, such as credit cards and medical bills.
Chapter 13 Bankruptcy
A Chapter 13, also known as reorganization, requires debtors to work with the trustee to develop a repayment plan with their creditors. A Chapter 13 combines your secured debts and pays them off over three to five years. You must stay current on the payment plan.
At the end of the payment period, the court may grant a discharge of many remaining dischargeable debts. Some debts are not dischargeable, and some liens can survive.
Chapter 13 is the best choice for homeowners facing foreclosure or those with non-exempt assets they wish to keep. To qualify for Chapter 13, you must have a steady income that can support a monthly payment plan and cover your living expenses.
New Mexico Bankruptcy Exemptions
New Mexico is a “choice” state, meaning you can choose either the New Mexico bankruptcy exemptions or the federal exemptions, but not both. Some of the important exemptions in a bankruptcy filing include:
- Homestead exemption: The homestead exemption protects up to $437,600 of equity in your home
- Motor Vehicle: Up to $10,000 equity in motor vehicles per person per vehicle
- Household goods: Furniture, clothing, and appliances, up to $75,000
- “Tools of the trade”: Necessary items for carrying out one’s profession up to $15,000
Savings, retirement accounts, Social Security payments, and similar funds are generally exempt.
New Mexico is one of the few states that has a “wildcard” exemption. You can claim up to $15,000 in property not otherwise exempt under this exemption.
These figures are periodically adjusted. Filers should consult a bankruptcy attorney when preparing a bankruptcy case.
New Mexico Bankruptcy Protection
When you file any type of bankruptcy in New Mexico, you’re often required to complete a government-approved credit counseling course within 180 days before filing the bankruptcy petition. You need to include the certificate of completion with your filing.
You must also pay the bankruptcy filing fee. As of 2026, the filing fee for Chapter 7 bankruptcy is $338. For Chapter 13 bankruptcy, it’s $313. You can ask to pay in installments or request a fee waiver if you cannot afford the full fee.
Immediately after filing, an automatic stay goes into effect. The stay halts all collection actions and lawsuits related to your bankruptcy, including:
- Foreclosure or eviction
- Wage garnishment related to collection actions
- Repossession efforts
- Lien action
The automatic stay does not halt all actions. It won’t affect wage garnishments for child support or similar court-ordered payments, nor can it halt an eviction if the landlord has already received a judgment and order for eviction. Creditors can file a Motion for Relief from Stay to remove the stay if they can demonstrate immediate harm if it remains in place.
Debts Not Covered in Bankruptcy
A Chapter 7 Bankruptcy only discharges unsecured debts. A Chapter 13 plan pays off as many debts as you can through the monthly payment plan. In both types of bankruptcy, some debts cannot be removed, no matter what you choose. Debts that cannot be discharged include:
- Student loans (a new program may allow you to show “undue hardship” and meet a very narrow set of criteria for clearance, but it’s still rare)
- Tax liens
- Child support and alimony arrearages
- Court-ordered restitution and fines
Choosing the best plan for your situation is crucial. Consider meeting with a bankruptcy attorney to ensure you take the right path.
Get Legal Advice From a New Mexico Bankruptcy Attorney
It’s tempting to handle your own bankruptcy filing, but unless you’re well-versed in finance and state laws, getting legal advice is a good idea. There are many federal and state requirements, and the numbers may change from year to year. An attorney can provide you with the current, accurate exemption numbers for your case. When you appear in bankruptcy court for the meeting of creditors, having a New Mexico bankruptcy attorney on your side can be a tremendous advantage.
Frequently Asked Questions About New Mexico Bankruptcy
Since money is often tight when people file bankruptcy, and the basic forms are available here, many people file DIY (Do-It-Yourself) pro se bankruptcies. DIY bankruptcies save money initially. But they can cost more in the long run. DIY filers do not know all the laws and procedures. Instead, they must feel their way in the dark.
A partnership with a New Mexico bankruptcy lawyer is a much better choice. An attorney takes care of all the complex paperwork. Additionally, only a lawyer can unlock advanced bankruptcy options, like the aforementioned tenancy of the entirety.
Most people must pay bankruptcy filing fees, which are usually about $350, in advance. Occasionally, payment plans or fee waivers are available. In contrast, payment plans and sliding scales are almost always available for legal fees. In fact, many bankruptcy lawyers allow clients to pay professional fees via the monthly debt consolidation payment.
Debtors must file a complete petition and schedules. Furthermore, they must cooperate with the trustee, timely pay all required fees, and attend all required meetings or hearings. All debtors must also complete a pre-filing credit counseling course in addition to a post-filing budgeting class.
Secured debt payments, like a home mortgage, are not dischargeable in bankruptcy. If you stop making payments, the creditor will seize the collateral, whether or not you file bankruptcy. Criminal fines and family support payments, like alimony, are not covered in bankruptcy. Some obligations, mostly student loans and back taxes, are only dischargeable in some situations.
If you have significant unsecured debt, Chapter 7 is typically better, because you quickly get a fresh start. If you are behind on secured debts or do not qualify for Chapter 7, Chapter 13 is better, because you get time to catch up on these payments. If both seem about equally beneficial, Chapter 13 looks a little better on a credit history report than Chapter 7.
New Mexico Bankruptcy Court
Where To File
The only bankruptcy court in the Land of Enchantment is in Albuquerque. DIY filers must submit all paperwork in person or via snail mail. Lawyers can use the state’s ECF (Electronic Case Filing) system to file paperwork, pay expenses, pull records, and perform other tasks.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.