Chapter 13’s benefits over Chapter 7

In the last several years, many New Mexico residents, have considered whether filing for bankruptcy makes sense because they have lost their jobs, incurred extremely high medical bills or faced home foreclosures. Although many people have a general idea about bankruptcy, they do not necessarily have a deep understanding of the process.


For the most part, a bankruptcy filing is intended to stop one’s creditors from harassing and seeking to collect outstanding debts. But what kind of bankruptcy should be filed and what are the differences between these available choices? For the overwhelming majority of individuals either Chapter 7 or Chapter 13 are the options to be considered. Chapter 7 allows for liquidation of one’s assets, while protecting certain exempt assets so the Debtor can obtain a “fresh start.” This procedure involves the debtor laying out all of his or her assets and liabilities in a filing referred to as a ‘schedule”. The trustee appointed by the court then liquidates any non-exempt assets and divides the money between the creditors generally based on the size of his or her claims. Chapter 7 normally allows the debtor to keep his or her house and car if  one is owned if he or she can pay the mortgage or loan against them. The debtor receives a “discharge” of his or her debts which frees them of the legal obligation to pay the debts.  The discharge does not remove mortgages or other secured claims against property, so if the debtor wishes to retain the property he or she must continue to pay for it.  Additionally, certain types of debts (taxes, alimony and child support, student loans and others), are not dischargeable.


By contrast, Chapter 13 bankruptcies do permit a wage earner to continue to earn income during the proceedings and for those funds – to be earned in the future – to be part of the basis for a prospective payout to creditors. The debtor must show the court what he or she earns and expects to earn going forward. When considering the assets and liabilities of the debtor, these future earnings are calculated as well and included in any plan to discharge debts and pay off creditors.  Moreover, Chapter 13 bankruptcy gives a debtor the chance to save his or her home from foreclosure if the debtor is facing that predicament. This particular feature of Chapter 13 bankruptcy makes it attractive to those considering their options.


In Albuquerque, Giddens & Gatton Law, P.C. has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.