It takes a highly competent and experienced attorney to properly handle bankruptcy law cases. Even though you may reside in New Mexico, bankruptcy law is a federal law and not all New Mexico lawyers are as intimately familiar with bankruptcy law as New Mexico Financial and Family Law. Whether you are a creditor, or a business or individual seeking bankruptcy relief; improperly handled cases can cost you thousands of dollars and have significant impacts on your personal and financial future. When bankruptcy cases become complex due to involved personal financial assets and liabilities and/or business assets and liabilities you want and need the support of an experienced attorney who can and will assist you through the all of the processes and, when needed, call upon experts to support your case. If you are a creditor in a bankruptcy case you need a strong and knowledgeable advocate by your side from the moment you receive a creditor’s Notice of Bankruptcy.
A Straight Bankruptcy: Involving Surrender of Most Non-Exempt Assets
Bankruptcy laws are very complex and errors or oversights made by creditors, individuals or businesses can and do have long term and significant financial effects. You want and need professionals on your side. New Mexico Financial and Family Law, specializing in bankruptcy, knows the fine details of all the issues and the firm has a proven success record in achieving the best possible results. You want a bankruptcy lawyer who knows federal bankruptcy law, is your strongest advocate, and will represent all of your interests! The earlier you see us the better it can be for your case. Click here to contact New Mexico Financial and Family Law.
“Straight” Bankruptcy: Chapter 7
Proceedings under Chapter 7 (straight bankruptcy) involve surrendering most of the borrower’s nonexempt assets. A bankruptcy trustee is appointed in every Chapter 7 case to administer the nonexempt assets (if any) and distribute either the assets themselves or the proceeds from selling (liquidating) them among the creditors. Straight bankruptcy under Chapter 7 may be available if less drastic methods will not solve your financial problems. It allows you to discharge (extinguish) most debts. If you believe that bankruptcy may be the way for you to get out of crushing debt or you want to understand other options, please us today
Eligibility for Chapter 7
It used to be possible for anyone to file for bankruptcy under Chapter 7. However, a new bankruptcy law – the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 – came into effect on October 17, 2005. Under the new bankruptcy law, you are eligible to file for bankruptcy under Chapter 7 if you earn less than the median income in your state. If you earn more than the median income in your state, then you will only be eligible to file for bankruptcy if you pass a “means test” to determine whether you are eligible.
How does the means test work?
To apply the means test, the courts will look at the debtor’s average income for the 6 months prior to filing and compare it to the median income for that state. For example, the median annual income for a single wage-earner in California was $42,012 at the time this page was first created. If the income is below the median, then Chapter 7 remains open as an option. If the income exceeds the median, the remaining parts of the means test will be applied.
Now, assuming you do not automatically qualify for Chapter 7 as above, it gets a little bit trickier. You may still be able to qualify. The next step in the calculation takes income less living expenses (including secured creditors and many other obligations but excluding payments on the debts that are subject to discharge) and multiplies that figure times 60. This represents the amount of income available over a five-year period for repayment of the debt obligations
If the income available for debt repayment over that five-year period is $10,000 or more, then Chapter 13 will be required. In other words, anyone earning above the state median, and with at least $166.67 per month of available income, will automatically be denied Chapter 7. So for example, if the court determines that you have $200 per month income above living expenses, $200 times 60 is $12,000. Since $12,000 is above $10,000, you’re stuck with Chapter 13.
What is the current status of the Means Test?
US Supreme Court Set to Decide What the “Means Test” Means The United States Supreme Court is set to decide an important question regarding one of the more controversial aspects of the new bankruptcy law-the “means test.” The means test was perhaps the cornerstone of the 2005 amendments to the Bankruptcy Code.
After nearly five years of bankruptcy attorneys and bankruptcy courts struggling with the issues, the Supreme Court should provide some much-needed clarification. The issues are complex, and bankruptcy lawyers throughout New Mexico, and indeed throughout the United States, will be carefully watching what the Supreme Court has to say about this important bankruptcy law issue.
Perhaps the most important aspect of the means test is the standardization of what constitutes “abuse” of the Bankruptcy Code so as to disqualify someone from filing for Chapter 7 relief. The means test also standardizes how income and expenses are calculated in Chapter 13 cases, ideally to reduce litigation over how much a person filing for bankruptcy, for instance, might need to budget monthly for utilities and transportation expenses.
A conflict which has arisen in the bankruptcy courts deals with a provision in the Bankruptcy Code relating to a person’s “projected disposable income” for the purposes of confirming a Chapter 13 plan. Some courts have ruled that the “projected” disposable income test is actually meant to mean the six-month-before-bankruptcy average that is provided by the means test as the person’s “current monthly income” as that term is defined by the bankruptcy law. Those courts have ruled that Congress wanted the standard to be predictable, and therefore, inflexible. Therefore, those bankruptcy courts and appellate courts have ruled that, whatever the means test result, it is what the Chapter 13 debtor must pay, whether or not his income will go up or down.
Other courts, including the Tenth Circuit Court of Appeals which governs the New Mexico bankruptcy courts, have ruled that “projected” means future. Those courts have ruled that the means test calculation is a tool, not a legal straightjacket. In New Mexico, the bankruptcy courts presently follow the Tenth Circuit and use the means test as the presumption, but will consider changed circumstances when appropriate. However, the Tenth Circuit’s opinion was appealed to the United States Supreme Court. Therefore, the final word on this important bankruptcy legal question affecting consumers in New Mexico is about to be written.
This case could have far-reaching consequences for anyone considering whether to file for bankruptcy in the Albuquerque area or anywhere in New Mexico. The case is Hamilton v. Lanning, Docket No. 08-998, and those interested in additional information can read the legal briefs here.
What is disconcerting to New Mexico bankruptcy attorneys is that the Supreme Court appears to have hinted that it is concerned about the effect of expenses as well as income, and whether the expenses can be reevaluated for changed circumstances as well. The Tenth Circuit explicitly limited its ruling to the “income side” of the means test, and did not consider the “expense side.” The Supreme Court might consider the expense side as well.
This case helps illustrate why you should consult with an experienced bankruptcy law firm, such as New Mexico Financial and Family Law, if you have any doubts about what the means test could mean to you in a bankruptcy proceeding.
What steps must be taken before filing for Chapter 7 bankruptcy?
Under the new bankruptcy law you must undergo credit counseling at an “approved non-profit budget and credit counseling agency” within 180 days before filing for Chapter 7 or Chapter 13. Credit counseling can take place individually or in a group, in person, on the telephone, or over the Internet. The law provides that the bankruptcy court clerk shall maintain a publicly available list of approved credit counseling agencies. So, if you are considering bankruptcy, contact your local bankruptcy court to find a credit counseling agency near you. New Mexico Financial and Family Law can also provide you with recommended credit counselors
Please note: a pleasant surprise has been realized by a number of our clients who, apparently exceeding the guidelines, found that they still could file under Chapter 7. A good bankruptcy lawyer may be able to “shoehorn” someone into a Chapter 7 case based on a detailed analysis of the particular facts involved. New Mexico Financial and Family Law recently helped a family of three with nearly $90,000 in gross annual income successfully complete Chapter 7 and keep all of their property. This was because the law allows for people who earn more than the median income to consider secured debt obligations, unusual medical expenses and other unique circumstances. Past success does not guarantee similar results for someone else, but you should contact a reputable bankruptcy lawyer before assuming that you cannot qualify for Chapter 7. To contact New Mexico Financial and Family Law, click here.
New Mexico Financial and Family Law is an Albuquerque, New Mexico based bankruptcy law firm which provides United States Bankruptcy legal services and advice throughout the state. The majority of its clients reside in the Albuquerque, New Mexico, area, i.e., Albuquerque, Bernalillo, Rio Rancho, Los Lunas and Belen. But the firm can also represent clients statewide in Hobbs, Las Cruces, Clovis, Farmington and other New Mexico cities. New Mexico Financial and Family Law represents clients who reside in New Mexico and also New Mexico residents residing in out-of-state jurisdictions. Bankruptcy law, as practiced by New Mexico Financial and Family Law, addresses all of a client’s concerns; legal, financial, and emotional. We attempt to settle bankruptcy cases through negotiation. If negotiation is unsuccessful then the trial skills of the attorneys at New Mexico Financial and Family Law are brought into play. Don Harris is a well-known and respected Albuquerque, New Mexico, lawyer. The firm not only provides the legal bankruptcy advice and guidance expected of an experienced lawyer, we also work with other professionals such as financial advisors, CPAs and mental health counselors to provide the firm’s clients with many of the services needed to get through their financial and personal challenging times.
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Pursuant to 11 U.S.C. §528(A)(4) We are required to state the following: We are a debt relief agency. We help people file for Bankruptcy relief under the Bankruptcy Code.
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