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Chapter 13 bankruptcy: A long road ahead

If you feel like you're drowning in debt and the situation is in no position to recover, filing for bankruptcy can help you get back on track and even help you establish positive money management skills to recover your credit score in the future.

Chapter 13 bankruptcy is a popular option for its ability to put an immediate stop to credit collector efforts and wage garnishment. However, the process a Chapter 13 entails is a long one.

A steady payment plan

Under Chapter 13, you will repay your debt through a payment plan lasting at least three to five years. The amount of debt you must repay may be reduced, but the exact length of your payment plan will depend on the amount of debt you have in proportion to the income you make and whether your monthly income exceeds New Mexico's median.

As you repay your debt over these years, you'll likely be required to make regular appearances in bankruptcy court while you work through your debt. This is a much longer, more involved process than the Chapter 7 bankruptcy, which cancels your depts.

However, despite the lengthy payment plan process, a Chapter 13 bankruptcy has many benefits, such as:

  • Keeping exempt and non-exempt property
  • Preventing creditor collection efforts from you or co-signers
  • Protection against foreclosure of your house

    Filing requirements

    There are specific requirements in New Mexico for filing for bankruptcy.

    For example, a debtor must:

    • Complete a budget and credit counseling within 180 days prior to filing a petition for bankruptcy
    • Submit a certificate of completion within 14 days of filing for bankruptcy

    Failing to complete credit counseling or your certificate of completion on time may result in the dismissal of your case.

    Contact an attorney before filing

    Other factors may influence whether you are eligible to apply for a Chapter 13 bankruptcy. If you are considering filing for Chapter 13 bankruptcy, consult with an attorney to learn more about your options. A lawyer can help ensure that you choose the best bankruptcy plan for your financial situation and have met all of the qualifications and procedures necessary to file.

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