There are many contributing factors that are associated with financial hardship. The most common reasons include heavy debt, loss of a job, divorce, home foreclosure, or illness.
In fact, the average credit card debt in Rhode Island is a whopping $5,673 per person. In addition, foreclosure rates are also as staggering, one out of every 1,808 RI homes is currently in foreclosure.
If you find yourself struggling with similar situations, then you are more than likely dealing with other personal problems that come with dealing with debt. The fear of losing your automobile, house or your income can drain a person physically and emotionally. You may have even considered Filing for Bankruptcy .
If you are thinking “Is Bankruptcy Best For Me?” you are undoubtedly not alone. Around a million people file bankruptcy each year in the United States. Bankruptcy is a device provided by the US Government to help struggling Americans find relief from heavy debt. You may want to consider filing bankruptcy if it’s best for you.
What Is Bankruptcy?
Bankruptcy gives people the opportunity to resolve their debt while still working with lenders in a legal capacity. It is initiated by a person filing a Petition with their nearest bankruptcy court. The Petition can be filed by an individual or by spouses jointly. When the bankruptcy is settled, the filer will ‘exit’ and will have a chance for a fresh start on their finances.
Throughout the bankruptcy, a trustee is appointed to oversee the particulars of the matter. His or her duties will vary and depend on whether the individual has filed for Chapter 7 or Chapter 13 bankruptcy.
Did you know that Rhode Island ranks #25 in the nation for bankruptcy filings. In 2017 the number of personal bankruptcies was approximately 287 out of every 100,000 residents.
What Is The Difference Between Chapter 7 And Chapter 13?
Individuals or couples in Rhode Island, who claim bankruptcy, can choose to file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Want to know the difference? Look below for more information
The trustee of the bankruptcy will liquidate the assets, such as cars, homes, and other property of value in a Chapter 7 Bankruptcy proceeding, In exchange for dissolving all past due debts.
The proceeds collected during liquidation will be used to repay debtors that were listed on the bankruptcy filing.
If you have the means to pay some of your debts, a chapter 13 bankruptcy plan may work for you. The individual will be allowed to keep his or her valuable assets over a 3- to 5-year time frame.
In order to decide which chapter a person can file, they will have to assess their ability to repay using the Bankruptcy Means Test.
What Is A Bankruptcy Means Test?
The goal of the Bankruptcy Means Test is to determine who is eligible to apply for debt forgiveness through a Chapter 7 Bankruptcy. It considers your:
- income and expenses
- household size and composition
- debt-to-income ratio
For those who do not qualify for a Chapter 7 filing, they will be able to file for Chapter 13, as described above.
What Are Bankruptcy Exemptions?
The federal bankruptcy exemptions are a list of exclusions by Congress that are available to filers in specific states. These exemptions will determine what you are able to retain throughout and after Chapter 7. In a Chapter 13 situation, the exemptions will determine what amount you will have to pay certain financial institutions in your repayment plan.
- $500,000 occupied or intended to be occupied as primary residence. Married couples filing jointly may not double the homestead exemption.
- Consumer cooperative association holdings up to $50.
- All motor vehicles up to $12,000 total; clothing needed; furniture, beds and bedding, household goods and supplies up to $9,600 total (spouses may not double); jewelry up to $2,000 total; books up to $300 total; burial plot; debt owed to you which is secured by a promissory note or bill of exchange; and prepaid tuition accounts.
- Earned but unpaid wages up to $50; wages of spouse; earned but unpaid wages of a seaman; wages exempt for 1 year after getting off relief if you have received welfare prior to filing for bankruptcy; wages paid by a charitable organization; earnings of a minor child.
- Earned but unpaid wages of a military member on active duty.
- Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).
- IRAS and Roth IRAs to $1,283,025.
- ERISA-qualified benefits; IRAs and Roth IRAs.
- Police officers and firefighters.
- Private employees.
- State and municipal employees.
- Crime victim’s compensation.
- Workers’ compensation.
- State disability benefits.
- Unemployment compensation.
- Veterans’ disability or survivor benefits.
- General assistance; aid to blind, aged, and disabled.
Tools of Trade
- Working tools up to $2,000; library of a professional in practice.
- Life insurance proceeds if policy prohibits use to pay creditors.
- Accident or illness proceeds, benefits, dividends, interest, loan, cash, or surrender value.
- Fraternal benefit society benefits.
- Temporary disability insurance.
- Business partnership property.
Want to know if you can include Student Loans in Bankruptcy or Medical Bills in Bankruptcy? Check out our Bankruptcy FAQ’s section.
Filing Bankruptcy Alone vs. Filing With An Attorney
Current laws do not require filers to hire a lawyer to declare bankruptcy relief. People are permitted to represent him or herself as a pro se debtor. You will simply contact the local bankruptcy court and obtain all forms and requirements directly through them. Filing alone is not an easy task.
Filing Bankruptcy without an Attorney
A simple Chapter 7 case that doesn’t have a lot of debtors or assets may be easy to manage on your own.
A basic bankruptcy that doesn’t involve an attorney might look like:.
- Your income is below the state median;
- You have no property;
- Your debts will be considered dis-chargeable.
Working With An Attorney
In most cases, it is usually in one’s best interest to work with a bankruptcy lawyer. A bankruptcy lawyer is there to represent you and not in the interest of creditors.
An attorney is also accustomed with exemption laws. Plus, they can come up with creative strategies to keep your assets through practical repayment strategies that are fair to everyone involved.
While you may have the fight and ability to manage a Bankruptcy on your own, it tends to make things a lot easier on an already stressful situation, especially when there is so much at stake.
What Does Bankruptcy Include?
Once you file for bankruptcy in RI, the courts put in place an order called an Automatic Stay. This order will stop debt collection calls, wage garnishments, and additional claims. Keep in mind that payments regarding child support and criminal cases will still need to be made during this time.
In any event, Bankruptcy will be able to include:
- credit card debt
- protection from eviction
- avoidance of foreclosure
- utility bills
- medical expenses
Again, unless you are filing a complex Chapter 13 case, you will lose all assets associated with a Chapter 7 Bankruptcy protection. You will, however, be able to prevent any and all collections from occurring as long as they were incurred before the date of filing and discharge.
Final Thoughts And Considerations On Filing For Bankruptcy In Rhode Island
As you can see, there a lot of information associated with successfully filing for bankruptcy and then exiting it unscathed or satisfied. Only a licensed bankruptcy attorney can guide you through this arduous process, particularly when it comes to complex cases. Be sure to hire someone you respect and trust.
Bankruptcy Courts In Rhode Island
Additional Rhode Island Resources
Foreclosure Help Program
Disability SSDI Benefits