Commencement of a bankruptcy case creates an estate. The estate technically becomes the temporary legal owner of all the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.

In New Mexico, as in other states, the commencement of a bankruptcy case results in the creation of a bankruptcy estate, which is a central concept in bankruptcy proceedings. This estate becomes the temporary legal owner of the debtor's assets and includes all legal or equitable interests of the debtor in property at the time the bankruptcy case is filed. The estate encompasses not only property directly owned by the debtor but also property held by others in which the debtor has an interest. The purpose of the estate is to gather the debtor's assets to allow for the orderly distribution to creditors. The distribution is typically made from the nonexempt assets of the estate, as certain property may be exempt from the estate under New Mexico's exemption laws or federal exemption laws, depending on which set of exemptions the debtor has chosen to apply in their case. These exemptions allow debtors to keep certain property for a fresh start after bankruptcy. Creditors are paid according to the priority established by bankruptcy law, with nonexempt assets being liquidated to satisfy creditor claims as part of the bankruptcy process.