New Mexico Debt Relief: Your Guide to State Laws and Managing Debt

Debt doesn’t discriminate — anyone can suffer from it. Whether you fell into some bad times and maxed out your credit cards or you’re falling behind on loan payments as it is, debt could be haunting you. And the people of New Mexico suffer from debt, too. In fact, New Mexicans have the fourth-highest amount of auto loan debt per capita in the U.S., with an average balance of $5,420.

Find out how New Mexico debt relief is handled, as well as debt consolidation options for New Mexico residents.

• Debt in New Mexico: At a glance
• Debt collection in New Mexico
• New Mexico debt-relief programs
• Payday lending laws in New Mexico
• Tips to tackle debt in New Mexico
• Filing for bankruptcy in New Mexico
• The bottom line

Debt in New Mexico: At a glance

Debt collection in New Mexico

Thanks to the federal Fair Debt Collection Practices Act (FDCPA), passed in 1977, New Mexico debt collectors are prohibited from acting in an abusive manner to pursue a debt. Debt collectors cannot contact you from 9 p.m. to 8 a.m., call you at work or publicly post your personal information.

Debt collectors aren’t allowed to harrass you or use profane language, and they cannot contact you if you have an attorney. Collection agencies must obtain a license to collect debt in New Mexico.

While some states provide additional protections on top of the FDCPA, the New Mexico Collection Agency Regulatory Act, or CARA, doesn’t provide any further requirements to collect consumer debt. This means the FDCPA would be implemented when CARA doesn’t cover it.

If a debt collector obtains a judgment against you in court for a consumer debt, New Mexico does have some protections in place. In New Mexico, your wages only can be garnished up to 75% of your disposable earnings within that pay period. Garnishment can continue until the debt is paid in full, and if you’ve been charged fees and other costs related to the unpaid debt, those can be garnished as well.

Additionally, up to $60,000 in a dwelling or mobile home (or $120,000 if the debtor is married) and up to $5,000 in equity in a vehicle is exempt. It’s up to the debtor to claim these exemptions, though, as they will otherwise be waived.

Responding to collection letters

Whether you have the funds to pay or not, a debt collector can come after you for payment. First, ask the debt collect for more information to validate the debt, like the name of the original creditor and the amount owed in the outstanding debt. You can still dispute the debt if it’s not yours, and you have 30 days to do so once you receive the requested information from the debt collector.

If you’re being harassed by a debt collector, there are a few ways to try to get it to stop.

A debt collector is required to stop contacting you if you submit a written request.You can use sample letters from the Consumer Financial Protection Bureau (CFPB) to send to debt collectors in order to end contact. Make sure to keep copies of all the letters you send. If you have an attorney, make sure to tell the debt collector who is contacting you, so they will contact your attorney instead of you.

Ignoring a debt collector doesn’t mean the contact will stop. If the debt is yours, the collector can find other ways to get you to pay it back, sometimes by attempting to sue you. If the debt isn’t yours or you’re experiencing harmful and abusive practices from a debt collector, you can submit a complaint to the CFPB or the New Mexico Attorney General:

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau

P.O. Box 2900

Clinton, IA 52733

Toll-free: 855-411-2372

TTY: 855-729-2372

Consumer and Family Advocacy Services Division

Office of the Attorney General

P.O. Drawer 1508

Santa Fe, NM 87504-1508

844-255-9210 or 505-490-4060

Understanding New Mexico’s statute of limitations

The statute of limitations is how long debt collectors have to sue you to collect old debts. After the statute of limitations elapses, debt collectors will have a hard time getting a court order to get you to pay your outstanding debt, now considered a time-barred debt.

The statute of limitations for debt collection in New Mexico ranges from four to 10 years, depending on the type of debt. If a debt collector is trying to get money from you for unpaid credit card balances, the statute of limitations runs out after four years, for example.

Keep in mind that if you pay a portion of any time-barred debt, the statute of limitations resets and the clock restarts. If have an old debt, you may not need to pay it if the statute of limitations has run out. However, late payments and debt in default can stay on your credit report for six years.

New Mexico debt relief programs

If you’re a New Mexico resident, there are programs available to help you handle your debt.

• NewMexicoDebtRelief.org compares state providers and recommends organizations that can help you based on your individual debt situation. They offer consolidation services, debt settlement options and some handy do-it-yourself tips for you to work your way out of debt.
• Money Management International, a nonprofit credit counseling company, offers counseling over the phone and online 24 hours a day. The company has an office in Albuquerque, where you can visit a counselor in person to create a plan that best fits your financial situation.
• AARP New Mexico, based in Santa Fe, is open from 8:30 a.m. to 4 p.m. This nonprofit aims to help people over age 50 with their financial struggles. It’s free, but an appointment is requested.

There’s also nationwide programs that help you tackle debt no matter where you are. The National Foundation for Credit Counseling is one of the largest nonprofits to help Americans with their debt. You may also see them through the Consumer Credit Counseling Services, which specifically help with your credit card debt.

Payday lending laws in New Mexico

While many states allow payday loans, New Mexico isn’t one of them. New Mexico repealed its payday loan statutes in 2017. Payday loans are very short-term loans that you pay back by your next payday, usually within two to four weeks. Interest rates are typically very high — sometimes as steep as 400% or more.

Tips to tackle debt in New Mexico

If you’re ready to get rid of your debt once and for all, explore all of your options first. Settling for the first one you find may not give you the best benefits, based on your financial situation.

Consolidate your debt

Debt consolidation combines all your debt and gives you the chance to make manageable payments based on your income. Instead of making many payments to many different lenders, you’ll make a single payment to one company or lender.

There are many credit counseling services and agencies that offer debt consolidation options. If you handle it on your own, you can take out a personal loan to pay off all your outstanding debt, whether it’s credit cards or other loans, and then make payments on that one personal loan every month. Personal loan interest rates and terms vary based on your creditworthiness, but often offer lower interest rates than credit cards.

If you’re facing a mountain of debt, however, you may not qualify for a low-interest personal loan because your credit score has been affected. If that’s the case, you might want to find a cosigner. A cosigner can help you get a personal loan you wouldn’t otherwise qualify for. The person’s credit score would be used to determine your interest rate, which means the higher the credit score, the lower your interest rate. But keep in mind that using a cosigner also has its drawbacks. If you don’t stay current on your payments, both your credit score and your cosigner’s will suffer.

Refinance your debt

Refinancing some of your loans can help reduce your monthly payments. When you refinance, you’re taking out a new loan to replace your other loan or loans. You’ll get new terms and a new interest rate. If you currently have a home or auto loan that you’re having trouble paying, reach out to your lender to ask about refinancing options.

If you’re still paying off your student loans, you may want to consider refinancing them as well. Refinancing can help reduce your interest rate and get you loan terms that are more financially in line with your budget. However, you’ll lose access to many of the federal student loan relief benefits, like student loan forgiveness.

While it’s helpful, refinancing isn’t always guaranteed to lower your interest rates. If your credit isn’t great, you could end up with a higher interest rate than what you pay now. Only explore this option if you can use it to get to lower monthly payments, whether with a lower interest rate or a longer-term loan.

Get a credit card balance transfer

A credit card balance transfer takes your outstanding debt from one or more credit cards and moves it to a single new credit card, usually with an introductory 0% APR for a set amount of months, usually 12 to 21 months. You typically need to have an excellent credit score to qualify for these offers though.

A balance transfer card can be beneficial if you can use it to avoid having to pay interest and late fees on several cards every month — if you’re sure you can make payments in full. But balance transfers won’t guarantee a full transfer, which means you may still be responsible for paying off the remaining balance on any cards that couldn’t get moved over.

For example, if you have $10,000 in credit card debt, and are approved for a $6,000 balance transfer, you’re on the hook for the remaining $4,000 that still has interest rates based on your credit score and total amount owed. Plus, you’ll need to start making payments on the balance transfer amount, even if interest rates aren’t calculated. Be sure to take these factors into consideration so that you don’t end up falling into deeper debt than you were before.

Also be mindful that some cards may charge a balance transfer fee, typically around 3%. Make sure you review all card options before choosing a balance transfer.

Home equity loans and lines of credit

If you own your home, you can explore a home equity loan or home equity line of credit (HELOC). A home equity loan is sometimes referred to as a second mortgage. It gives borrowers a lump sum that they must then pay back, usually at a fixed interest rate. If you know how much money you need to pay off your debt, a home equity loan may be a good option.

A HELOC allows you to draw funds as needed up to the limit approved by your lender. It’s similar to a credit card. It typically has a variable interest rate, which means repayments can fluctuate based on market conditions.

Home equity loans and HELOCs tend to have lower interest rates because they are secured with your home as collateral. That’s a useful benefit, but it also means that if you don’t or can’t pay it back, you could lose your home.

Filing for bankruptcy in New Mexico

If you find that your debt is insurmountable, you may want to consider filing for bankruptcy. This is usually the last resort if you haven’t found any other workable option.

While bankruptcy can offer you a fresh start by eliminating some debt you’re responsible for, it’s not guaranteed to remove all your outstanding debt. For one thing, student loan debt usually isn’t discharged in bankruptcy, unless you’re able to prove “undue hardship.”
Your income and assets will determine which bankruptcy filing approach is best for you. Chapter 7 bankruptcy, also known as liquidation bankruptcy, means your assets are liquidated to pay off your old debt. You’ll need to determine whether you’re eligible based on how much you earn and your discretionary income. Not everyone qualifies.

Chapter 13 bankruptcy makes your debts into manageable payments. While Chapter 7 liquidates your assets, Chapter 13 reorganizes your debts, meaning you may have to make regular monthly payments, which get broken up into smaller payments for each collector you’re still obligated to pay. It’s best for people who own homes or other property. In Chapter 13, you must complete your court-ordered repayment plan or you could lose your properties.

The cost to file Chapter 7 bankruptcy in New Mexico is $335, and for Chapter 13 is $310. Sometimes you can get this fee waived, reduced or rolled into your repayment plan in a Chapter 13 filing. Contact a bankruptcy lawyer in New Mexico if you’re looking to explore this as an option.

The bottom line

If you’re drowning in debt, you may feel overwhelmed, anxious and unsure of how you will ever get out of it. Thankfully, there are debt relief and consolidation options in New Mexico made just for you and others who need help.

Before you settle on a choice, make sure to review all your options first. Whether it’s consolidation, refinancing, taking out a loan or filing for bankruptcy, there are a several different ways to handle your debt crisis.

This article contains links to CompareCards, a subsidiary of LendingTree.

The information in this article is accurate as of the date of publishing.