Chapter 7 Basics
Chapter 7 vs. Chapter 13 in New Mexico: what to compare
Compare bankruptcy chapters, including income review, property risks, repayment obligations and collection-stay limits for New Mexico readers.
By 505 Bankruptcy · · Updated
Educational information only, not legal advice. This article does not assess your eligibility or predict an outcome.
Chapter 7 and Chapter 13 handle debt differently. Chapter 7 can involve selling nonexempt property; Chapter 13 is a court-supervised repayment process for eligible individuals with regular income. Choosing between them requires more than comparing income: property, secured debts, prior cases and the ability to meet ongoing obligations matter.
Anita M. Kelley handles Chapter 7 bankruptcy matters. This comparison is educational; Chapter 13 representation is not an offered service of the firm.
What is the main difference?
| Question | Chapter 7 | Chapter 13 |
|---|---|---|
| What is the general process? | A trustee administers the case and may sell nonexempt property. | The debtor proposes a plan to repay all or part of debts, subject to court approval. |
| What happens to property? | Applicable exemptions and other rules affect what may be retained; property can be at risk. | Retaining property comes with plan and payment obligations; it is not an unconditional right to keep everything. |
| What commitments should I understand? | Disclosure, documents, required steps and the effect on debts and property. | A plan generally lasting three to five years, plus applicable ongoing obligations. |
The U.S. Courts explains these processes in its Chapter 7 overview and Chapter 13 overview. Neither summary determines the right choice for a particular person.
Does income decide whether I qualify?
Income is important, but a below-median estimate is not a complete eligibility decision. The means test applies in certain Chapter 7 cases, and its income and expense rules require careful review. Above-median income does not automatically rule out Chapter 7.
Chapter 13 has its own eligibility requirements, including regular income and statutory debt limits. A workable plan must satisfy legal requirements as well as the practical ability to make required payments. Read what a means-test estimate can tell you before treating a result as a recommendation.
What happens to a home or car?
Separate two questions: what value in the property might be protected, and what obligations remain to a lender. An exemption is not the same as removing a mortgage or vehicle lien. A discharge of personal liability also does not necessarily eliminate a valid lien.
Chapter 13 may allow a homeowner to address mortgage arrears through a plan, but ongoing mortgage payments still matter. Vehicle loans raise additional questions about the loan, property and proposed treatment. Neither chapter guarantees that you can keep or recover a particular vehicle. See the home, equity and foreclosure guide for the distinctions to discuss with an attorney.
Does bankruptcy stop collection immediately?
Filing a bankruptcy petition generally creates an automatic stay that stops many collection actions, which can include garnishment, foreclosure and collection lawsuits. Exceptions apply; prior filings can limit protection, and a creditor can ask the court for relief from the stay. A stay is not a permanent solution to every debt or a guarantee that property will be returned.
Contacting a lawyer or using a calculator does not file a case or create a stay. If a sale, lawsuit response or other deadline is approaching, identify it clearly and confirm that an attorney has agreed to handle it.
Are all debts discharged?
No. A discharge has exceptions, and the treatment of a debt depends on its type and circumstances. Secured debts, taxes, support obligations and other categories require individual review. The discharge introduction explains why a general promise to erase every debt is unreliable.
What should I compare with an attorney?
Bring a list of debts, property, income changes, past filings and deadlines. Ask what each option would require, which risks remain, what costs are involved, and whether a non-bankruptcy option deserves consideration. Ask what happens if a proposed Chapter 13 payment becomes unaffordable.
The New Mexico Bankruptcy Court’s self-help resources provide local procedural background. They do not replace legal advice about your facts.
Use the consultation questions to prepare, then ask the office about availability and fees. The office handles Chapter 7; this comparison does not determine whether you qualify to file or which option fits your circumstances.
Common questions
Does Chapter 13 mean I must repay every debt in full?
Not necessarily. Chapter 13 plans repay all or part of debts, but different categories receive different treatment and the plan must meet legal requirements. A short online comparison cannot calculate the required payments.
Is a faster process always the better choice?
No. Timing alone does not resolve property risks, eligibility, secured debts or ongoing payments. Ask why an approach fits your circumstances.
Does calling a lawyer stop wage garnishment?
No. An inquiry does not create bankruptcy protection. Ask an attorney about the specific collection action, any deadline and whether a filing or another response is appropriate.
About this content: How these articles are prepared · Official bankruptcy resources
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