Can you file for bankruptcy in New Mexico and keep your home?
Even after the recent downturn in the housing market, many Americans largest asset is still their home. As a result, many contemplating bankruptcy are concerned that filing a chapter 7 bankruptcy case will result in the forced sale of their home by the bankruptcy trustee.
Under New Mexico bankruptcy laws, debtors can protect $60,000 of home equity through the bankruptcy process. Married couples filing jointly can double the exemption to $120,000.
How does the New Mexico homestead exemption work in the context of a chapter 7 bankruptcy case? Let’s say John and Jill, a married couple, own a home in Santa Fe worth $200,000 with a mortgage lien of $100,000. In this example, John and Jill have $100,000 of equity in their New Mexico home. If they decided to file for bankruptcy due to overwhelming credit card debt, they would be able to keep their home through the bankruptcy process since their $100,000 of home equity is well below the $120,000 limit set by New Mexico bankruptcy laws.
A Few Things to Keep in Mind:
1. Even if your home is exempt under New Mexico bankruptcy laws, you will still need to keep the mortgage current if you want to avoid foreclosure.
2. Homestead exemptions do not apply to investment property.
If you’re considering bankruptcy and are concerned about how your real estate might be affected, consult a bankruptcy attorney in your area.