People experiencing financial hardship may decide to file for bankruptcy for their own protection. Those who file for bankruptcy can put an end to collection activity and can also discharge some of their eligible debt.
Those in need of the relief of bankruptcy typically have to choose between Chapter 13 proceedings and a Chapter 7 filing. Chapter 7 bankruptcy is faster, but it sometimes requires the liquidation of personal property. The courts can sell off non-exempt assets in an attempt to repay creditors before granting the filer a discharge.
Exemptions are available to help people protect some of their most important assets when they file a Chapter 7 bankruptcy. The homestead exemption specifically protects the equity an individual has accrued in their primary residence.
There are two exemptions potentially available
Federal bankruptcy laws established baseline exemptions. Every state also has its own statutes related to bankruptcy. In New Mexico, those filing for bankruptcy have the option of using either state bankruptcy exemptions or federal bankruptcy exemptions.
State lawmakers recently increased the homestead exemption in a New Mexico Chapter 7 filing. An individual filing alone can protect up to $150,000 in home equity. Married couples and those widowed recently can potentially protect up to $300,000 in home equity by using New Mexico bankruptcy exemptions.
People can also choose to use federal exemptions, although the current homestead exemption is lower. Someone who files using federal exemptions in New Mexico could protect up to $27,900 when filing on their own or $55,800 when filing with a spouse.
The amount of home equity someone has accumulated and the other property they hope to protect from Liquidation can influence which type of exemptions they use when pursuing a Chapter 7 filing. The proper use of exemptions can help those able to qualify for Chapter 7 bankruptcy to protect as much of their resources as possible while dealing with their debts.
Understanding and using bankruptcy exemptions can help people minimize the negative consequences of a personal bankruptcy while maximizing what resources they retain. Homestead exemptions help ensure that those going through financial hardship can preserve at least a significant portion of their accumulated home equity.
