Around 100 cars changed hands, the two men behind it grossed past a million dollars, and on July 1, 2025 the Seventh Circuit affirmed prison terms of 70 and 60 months. The pitch sounded like a favor: a towing company would cover a debtor’s filing fee and attorney fee, and the debtor would let it tow the car away. New Mexico debtors hear the same offer. United States v. Fenner, Nos. 23-2177 & 24-1089 (7th Cir. July 1, 2025), matters in Albuquerque and Farmington because the debtors were not the defendants. They were the bait.
Federal law assumes someone other than the debtor may pay the lawyer, and responds by requiring the arrangement be filed where a judge can unwind it, the work of 11 U.S.C. § 329 and Rule 2016(b). The premise is wrong here too: the vehicle figure in NMSA 1978 § 42-10-1 is twice the federal number.
What did the Seventh Circuit actually decide in United States v. Fenner?
What the defendants were convicted of is the detail most commentary omits. Not bankruptcy fraud. The opinion describes seventeen counts: conspiracy to commit mail and wire fraud, seven wire fraud, six mail fraud, and three money laundering counts. No count under 18 U.S.C. § 152 or § 157 appears, because the lies went to lienholders, auction attendees, and the Indiana Bureau of Motor Vehicles.
The opinion opens plainly: “Fenner ran a towing company.” Birkley financed it under what Fenner called a “floor plan” arrangement and paid the debtors’ attorneys with checks on Fenner’s account. A Ford subsidiary sued, an Indiana court enjoined the scheme for violating the lien statute’s notice and timing rules, and the Seventh Circuit affirmed.
Who can legally pay a New Mexico debtor’s bankruptcy attorney fees?
Someone else can pay. Section 329(a) requires the debtor’s attorney to file a statement of “the compensation paid or agreed to be paid” and “the source of such compensation,” and Rule 2016(b), restyled effective December 1, 2024, gives 14 days after the order for relief to file it and serve the United States trustee. Official Form 2030 reduces that to a checkbox, “Debtor” or “Other,” which is where a Fenner arrangement dies. Section 329(b) then lets a court order the payment returned. In re Stewart, No. 15-12215-JDL (Bankr. W.D. Okla. May 27, 2025), from New Mexico’s own U.S. Trustee region, held a fee arrangement structured to get counsel paid “thus subject to Rule 2016 disclosure.”
Those making the offer are regulated too. Section 526(a)(4) bars a debt relief agency from advising anyone to incur more debt in contemplation of filing “or to pay an attorney or bankruptcy petition preparer a fee.” A preparer under 11 U.S.C. § 110 may give no legal advice and may not collect the filing fee, though it sets no maximum fee. New Mexico sits in U.S. Trustee Region 20, with an Albuquerque office.
How much of a New Mexico vehicle can a Chapter 7 debtor keep?
Laws 2023, ch. 104, § 4 rewrote § 42-10-1 effective July 1, 2023, exempting “a person’s aggregate interest in motor vehicles, not exceeding ten thousand dollars ($10,000) in value.” Former § 42-10-2 was repealed, so older citations mislead; § 42-10-14 directs a biennial adjustment from July 1, 2025, published by the Administrative Office of the Courts, so the operative figure may exceed it.
Under 11 U.S.C. § 522(b) a debtor may claim the federal list unless state law “specifically does not so authorize.” New Mexico’s article has no such bar, and the federal figure is $5,025 as adjusted April 1, 2025, so vehicle equity fares better under the state set (see the 2023 exemption overhaul). Three tools protect the car: § 362(a) stays “any act to obtain possession of property of the estate,” § 722 allows redemption, and § 524(c) reaffirmation.
Before You Sign Away a Vehicle for Bankruptcy Fees, Contact Us Now
How does New Mexico’s towing lien statute compare with the Indiana facts?
New Mexico’s version of the statute the Fenner defendants abused is narrow. NMSA 1978 § 48-3-19 gives those who tow, store, or furnish wrecker service a lien for the “reasonable value of such services,” perfected through § 48-3-13, requiring itemized notice and ten days to pay, and § 48-3-14, requiring twenty days’ notice and a public auction. The inflated lien and the 1:30 in the morning Christmas Eve auctions would break both.
What criminal and discharge risk does the debtor take on?
The debtors in Fenner were victims. A New Mexico debtor who signs schedules hiding the arrangement is not. Section 152 reaches anyone who knowingly and fraudulently conceals estate property, makes a false oath in a title 11 case, or transfers property in contemplation of one, and § 157 reaches a fraudulent scheme carried out by filing. Each carries up to five years. Section 727(a)(4)(A) works faster, denying discharge for a false oath, which the Tenth Circuit read in Job v. Calder (In re Calder), 907 F.2d 953, 955 (10th Cir. 1990), to require a “material matter” and “intent to defraud.” Section 548 gives the trustee two years to avoid a transfer for less than reasonably equivalent value.
What does the math look like for a Farmington pickup owner?
Consider a hypothetical. A Farmington resident owns a 2019 pickup worth $14,000 securing a $9,000 loan and is offered a “free” Chapter 7 filing in exchange for the truck. The equity is $5,000, the $10,000 exemption covers it, and reaffirmation under § 524(c) keeps the truck. The honest alternative is an $1,800 attorney fee plus a $338 filing fee, or $2,138. The “free” deal trades $5,000 of exempt equity and the truck for that $2,138, a net loss near $2,900 before the cost of reaching work in San Juan County.
The attorney-CPA point is that the numbers expose the arrangement, not the story. Vehicles go on Schedules A/B, the exemption on Schedule C, the lender on Schedule D, and a truck at $14,000 against a $9,000 lien and a $10,000 exemption reconciles to zero nonexempt equity. Delete the truck and the lender secures nothing, while line 18 of Official Form 107 asks about two-year transfers under a perjury warning.
How can a New Mexico debtor pay for a bankruptcy the lawful way?
The statutory fees in 28 U.S.C. § 1930(a)(1) are $245 for chapter 7 and $235 for chapter 13, and the current fee schedule adds $78 plus a $15 trustee fee, totaling $338 and $313. Section 1930(f)(1) allows a waiver below 150 percent of the poverty line, and Rule 1006(b) lets the clerk accept a petition with nothing paid on a signed installment application, four installments within 120 days.
Chapter 13 pays counsel through the plan, and bifurcated agreements get disclosed too. New Mexico Legal Aid runs statewide intake and a consumer law program, and the bankruptcy court keeps resources for filers without counsel. None costs a vehicle.
| Way to fund the filing | What the debtor gives up | Authority | Disclosure |
|---|---|---|---|
| Relative pays counsel directly | Nothing | 11 U.S.C. § 329(a); Rule 2016(b) | Form 2030, naming the payer |
| Towing company pays the fees | The vehicle and its exempt equity | 11 U.S.C. § 548; § 727(a)(2) | Yes, and it invites avoidance |
| Filing fee in installments | Nothing | Fed. R. Bankr. P. 1006(b) | Installment application |
| Filing fee waived | Nothing | 28 U.S.C. § 1930(f)(1) | Income under 150 percent |
| Fees through a chapter 13 plan | Plan payments over three to five years | 11 U.S.C. § 329; § 330 | Disclosure and the plan |
Frequently Asked Questions
Is it legal for someone else to pay my bankruptcy attorney fees in New Mexico?
Yes, but it must be disclosed. 11 U.S.C. § 329(a) requires the debtor’s attorney to file a statement of the compensation paid or promised and its source, and Fed. R. Bankr. P. 2016(b) sets a 14-day deadline after the order for relief. Section 329(b) allows excessive fees to be returned.
What is the motor vehicle exemption in a New Mexico bankruptcy?
NMSA 1978 § 42-10-1, rewritten by Laws 2023, ch. 104, § 4 effective July 1, 2023, exempts a person’s aggregate interest in motor vehicles up to $10,000. Section 42-10-14 requires a cost-of-living adjustment from July 1, 2025, published by the Administrative Office of the Courts, so the figure may be higher.
What federal statutes did the Fenner defendants violate?
The Seventh Circuit’s July 1, 2025 opinion in United States v. Fenner, Nos. 23-2177 and 24-1089, describes seventeen counts: conspiracy to commit mail and wire fraud, seven wire fraud, six mail fraud, and three money laundering counts. No count under 18 U.S.C. § 152 or § 157 appears.
Can a bankruptcy petition preparer in New Mexico advise me about my car?
No. 11 U.S.C. § 110(e)(2) bars a bankruptcy petition preparer from offering any legal advice, and the statute lists advice about which chapter to file, whether a debt will be discharged, and property the debtor may keep. A preparer may not collect the filing fee either.
Could handing my car to a third party cost me my Chapter 7 discharge?
It can, if the schedules hide it. 11 U.S.C. § 727(a)(4)(A) denies discharge for a knowing and fraudulent false oath, and the Tenth Circuit held in Job v. Calder (In re Calder), 907 F.2d 953 (10th Cir. 1990), that the oath must relate to a material matter and be made with fraudulent intent.
How can I pay the Chapter 7 filing fee if I cannot afford it?
Two routes exist. Fed. R. Bankr. P. 1006(b) requires the clerk to accept an individual’s petition with a signed installment application even if nothing is paid, allowing four installments within 120 days. Alternatively, 28 U.S.C. § 1930(f)(1) permits a waiver under 150 percent of the poverty line.
How North Star Law Firm Can Help
North Star Law Firm handles consumer and business bankruptcy in the District of New Mexico, including fee-source disclosure, vehicle exemptions, and prepetition transfers that should be unwound before filing. Phillip Zagotti, JD/CPA, is admitted before the U.S. District Court and the U.S. Bankruptcy Court for the District of New Mexico, and the firm works with New Mexico-licensed counsel on state-law lien and title questions. The Chapter 7 and Chapter 13 pages cover secured vehicles, the bankruptcy hub the rest.
A schedule set that reconciles, with a vehicle value, a lien balance, and an exemption claim matching the loan statements and the title record, keeps a case ordinary. One that does not draws the trustee to the transaction the debtor least wants examined. For the exemption figures see New Mexico’s exemption overhaul, and to discuss a vehicle or fee arrangement, contact North Star Law Firm.