Divorce and bankruptcy are both complex legal processes that can be overwhelming on their own, but when they occur together, things can get even more complicated. Divorce often leads to financial struggles, especially if one spouse is left with a significant amount of debt. Bankruptcy is a legal process that can help alleviate debt and provide a fresh financial start. But what happens when divorce and bankruptcy overlap?
If you’re considering a divorce and bankruptcy in New Mexico, there are several things you need to know. In this article, we’ll break down the basics of each legal process and how they can affect each other.
Divorce in New Mexico
Before diving into bankruptcy, it’s important to understand the basics of divorce in New Mexico. Divorce in New Mexico can be based on a variety of grounds including incompatibility, adultery, abandonment, cruel and inhuman treatment, felony conviction, and mental incapacity. While most divorces in New Mexico are granted on the grounds of incompatibility, it’s important to consult with a qualified attorney who can guide you through the specific requirements and processes for each ground.
In addition to grounds for divorce, New Mexico follows community property laws. This means that any property acquired during the marriage is considered community property and is subject to division in a divorce. This includes assets like real estate, bank accounts, retirement accounts, and personal property. It’s important to work with an attorney who can help you navigate the complexities of property division and ensure that your rights and interests are protected.
If the divorcing couple has children, child custody and support will also need to be addressed. In New Mexico, the court will consider the best interests of the child when making decisions about custody and support. It’s important to prioritize the well-being of the child and work with a skilled attorney to help negotiate and establish fair custody and support arrangements.
Bankruptcy in New Mexico
Now that we’ve covered the basics of divorce in New Mexico, let’s turn our attention to bankruptcy. Bankruptcy is a legal process that allows individuals to eliminate or repay their debts under the protection of the court. In New Mexico, the two most common types of bankruptcy are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy, also known as a "liquidation" bankruptcy, involves the sale of non-exempt assets to pay off creditors. To qualify for Chapter 7 bankruptcy in New Mexico, you must pass the means test. This test compares your household income to the median income in New Mexico for a household of your size. If your income is below the median, you will likely be eligible for Chapter 7 bankruptcy. It’s important to consult with an experienced attorney to determine your eligibility and understand the potential implications of filing for Chapter 7 bankruptcy.
Chapter 13 bankruptcy, on the other hand, allows you to restructure your debts and create a payment plan to pay off your creditors over a period of three to five years. To qualify for Chapter 13 bankruptcy in New Mexico, you must have a regular income and your unsecured debts must be less than $394,725 and secured debts must be less than $1,184,200. Working with a knowledgeable attorney can help you navigate the complexities of Chapter 13 bankruptcy and develop a repayment plan that fits your unique financial situation.
Divorce and Bankruptcy: How They Interact
When divorce and bankruptcy occur together, things can get complicated. Here are some things you should be aware of:
Timing matters when it comes to divorce and bankruptcy. If you file for bankruptcy before your divorce is finalized, your property division could be affected. Bankruptcy can impact how assets are divided in a divorce, so it’s important to carefully consider the timing of both processes.
On the other hand, if you file for bankruptcy after your divorce is finalized, your ex-spouse could be impacted. For example, if you file for Chapter 7 bankruptcy and your ex-spouse was granted alimony in the divorce, they may no longer receive those payments if your debts are discharged in bankruptcy. It’s crucial to discuss these potential impacts with your attorney and consider the best course of action for your specific circumstances.
If you and your spouse have joint debts, both of you will be responsible for paying off those debts. Even if one spouse files for bankruptcy, the other spouse will still be responsible for the full amount of the debt. This can have significant financial implications, and it’s important to work with your attorney to develop a strategy for managing joint debts during the divorce and bankruptcy processes.
In New Mexico, property division in divorce is based on community property laws. This means that any property acquired during the marriage is considered community property and is subject to division in a divorce. However, if one spouse files for bankruptcy, their property may not be subject to division in the divorce due to bankruptcy law exemptions that protect certain assets from creditors. It’s important to consult with an attorney to understand how bankruptcy exemptions may impact the division of property in your divorce.
Child support and alimony are not dischargeable in bankruptcy. This means that if you owe child support or alimony, these debts will not be eliminated through bankruptcy. It’s crucial to prioritize these financial obligations and work with your attorney to ensure that child support and alimony payments are appropriately addressed and protected.
Conclusion
Divorce and bankruptcy are complex legal processes that require careful consideration. If you’re going through a divorce and considering bankruptcy, it’s important to consult with an experienced attorney who can help guide you through the process. By understanding the basics of divorce and bankruptcy in New Mexico, you can make informed decisions about your financial future. Remember, timing matters, and working with a skilled attorney can help ensure that your rights and interests are protected throughout the divorce and bankruptcy processes.