Money troubles can seem like the end of the world. If debts are piling up, with no relief in sight, it may be time to consider filing bankruptcy. There are two main types for individuals. Both are protected by federal law. Chapter 7 is your more traditional type, in which assets are sold, or liquidated, to pay creditors as much as possible. In turn, remaining debts are wiped away. With Chapter 13 bankruptcy, debts are reorganized into a repayment plan over a set period of time.
Although bankruptcy is part of federal law, each state has its own rules, and Rhode Island is no exception. Rhode Islanders who are considering filing for either Chapter 7 or Chapter 13 bankruptcy should keep some key factors in mind.
Where to File Bankruptcy
The only bankruptcy court district in Rhode Island is located in Providence. All Rhode Island residents filing bankruptcy must file there.
Are You a Candidate for Chapter 7?
Chapter 7 bankruptcy is not an option for everyone. To qualify, your average monthly income must be less than the mean monthly income in Rhode Island. If you earn more than Rhode Island's mean income, you must be able to pass a stringent means test to qualify for Chapter 7.
How Long Will Your Chapter 13 Plan Last?
Your income also determines the duration of a Chapter 13 plan. Those who make less than Rhode Island's mean monthly income typically are limited to 36-month repayment plans, unless they can prove good reason for an extension. If the duration is extended, 60 months is usually the maximum allowed. Debtors who make equal to or greater than Rhode Island's median income generally get repayment plans that last 60 months.
What Property Is Exempt?
If you are considering Chapter 7 bankruptcy, you are likely wondering what property you get to keep in a liquidation. Each state has its own rules for exemptions. These exemptions are also considerations in deciding the terms of a Chapter 13 plan. In Rhode Island, you can choose between the state's list of exemptions or the federal list. Both allow exemptions for your home, vehicle, and certain personal and household items, but they differ in the values allowed. Here are a few examples:
- Homestead--Federal law offers an exemption for equity in real property valued up to $21,625. Rhode Island's homestead exemption is much more generous, allowing a value up to $300,000 for property you occupy.
- Vehicle--Federal exemptions allow for an automobile valued up to $3,450. The Rhode Island vehicle exemption goes up to $12,000.
Help From A Bankruptcy Attorney
For more legal information relative to your current position, please contact a Rhode Island bankruptcy attorney.