The New Mexico Motor Vehicle Exemption in Bankruptcy
Can you protect your car in bankruptcy with New Mexico's motor vehicle exemption? Find out here.
The New Mexico motor vehicle exemption helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. Here you'll find information about the New Mexico car exemption: how much it is, what types of vehicles it covers, how it works for married couples, how to find the applicable statute, and more.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
The Motor Vehicle Exemption and Your Car
New Mexico's motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than New Mexico's car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
The Amount of New Mexico's Motor Vehicle Exemption
In New Mexico, you can exempt up to $4,000 in equity in your car or other vehicle.
Example. Jenna owns a 2006 Subaru Outback. The car is worth $5,500 and she owes the dealership $1,800 on the loan, which means she has $3,700 of equity in the car. Jenna can file a Chapter 7 bankruptcy in New Mexico and use the motor vehicle exemption to fully protect her car.
The Federal Motor Vehicle Exemption
New Mexico allows you to choose between the state exemptions or the federal bankruptcy exemptions. The federal motor vehicle exemption amount changes every three years. To find the current amount, see our article The Federal Bankruptcy Exemptions.
Using New Mexico's Wildcard Exemption to Protect Your Car
If the equity in your car is more than $4,000, you may be able to cover the extra equity by using a wildcard exemption. New Mexico has a $500 wildcard exemption that you can use to protect any personal property. Additionally, you can protect up to $5,000 of property, including additional equity in your vehicle, if you do not own a home or own a home but don't use the homestead exemption.
Example. Jenna’s Subaru Outback is worth $5,500, but she has paid off the loan and owes nothing to the dealer. This means she has $5,500 of equity and the motor vehicle exemption will only protect $4,000 of that equity. Jenna can use the $500 wildcard exemption, but that still leaves $1,000 of unprotected equity in her car. She does not own a home, so she can protect up to an additional $5,000 of equity in her car or other property. Once this is added into the mix, she is able to protect the entire value of her car.
Can Married Couples Double New Mexico's Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. In New Mexico, married couples can double the motor vehicle exemption and protect up to $8,000 of equity in a motor vehicle.
(To learn more about filing a joint bankruptcy with your spouse, see Bankruptcy Considerations for Married Couples).
What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?
In New Mexico, you can protect one motor vehicle, such as a car, van, or truck.
Using the Tools of Trade Exemption to Protect Vehicle Equity
In New Mexico, you can protect up to $1,500 of equity in “tools of the trade,” meaning property you use to carry on your trade or business. If you use your vehicle to carry on your profession, for example, a tow truck, you can protect additional value under this exemption. Note that using your vehicle to commute to and from work will generally not qualify the vehicle as a tool of the trade.
Checking New Mexico's Exemption Laws
You can find New Mexico’s motor vehicle exemption at N.M. Stat. Ann. Sections 42-10-1 and 42-10-2.