An Alternative To Bankruptcy For Rhode Island Residents
As of 2021, the total state debt of Rhode Island was approximately $9.5 billion, with a per capita debt of around $8,952. This includes both general obligation bonds, which are backed by the state’s full faith and credit, and revenue bonds, which are issued to fund specific projects and backed by the revenue generated by those projects. Rhode Island has been facing financial challenges in recent years, including underfunded pensions and high levels of unfunded liabilities, which have contributed to the state’s debt burden. The state has taken steps to address these issues, including pension reform and efforts to improve its credit rating. According to the Rhode Island Department of Treasury, as of June 30, 2021, the state’s outstanding general obligation bond debt was approximately $1.6 billion, and its outstanding revenue bond debt was approximately $2.2 billion. According to data from the United States Courts, the number of bankruptcy filings in Rhode Island has decreased significantly over the past decade. In 2011, there were 2,486 bankruptcy filings in the state, compared to just 867 filings in 2020. The majority of these filings have been under Chapter 7 of the Bankruptcy Code, which allows for the discharge of most unsecured debt, such as credit card debt and medical bills. In 2020, 771 of the 867 filings in Rhode Island were under Chapter 7.
Bankruptcy Laws in Rhode Island
Bankruptcy laws in Rhode Island are governed by federal law, specifically the United States Bankruptcy Code. The bankruptcy process is overseen by the United States Bankruptcy Court for the District of Rhode Island. Individuals and businesses in Rhode Island can file for bankruptcy under several different chapters of the Bankruptcy Code, including Chapter 7, Chapter 11, and Chapter 13. Chapter 7 bankruptcy is the most common type of bankruptcy filing in Rhode Island, and it allows for the discharge of most unsecured debt. To file for bankruptcy in Rhode Island, individuals must meet certain eligibility requirements and complete a series of forms and paperwork. They must also attend credit counseling and meet with a bankruptcy trustee, who will oversee the bankruptcy process and may sell non-exempt assets to pay creditors. Rhode Island also has certain exemptions that may allow individuals to protect certain assets from being sold in bankruptcy, such as a homestead exemption for a primary residence, a vehicle exemption, and exemptions for certain types of personal property.
Bankruptcy Chapters 7, 13 and 11 – What You Need to Know
Things You Need To Know About Business Bankruptcy
If you are considering filing for business bankruptcy in Rhode Island, there are several things to keep in mind:
- Bankruptcy is a complex legal process: Bankruptcy can be a complicated and lengthy process, involving many legal and financial considerations. It’s important to work with an experienced bankruptcy attorney who can guide you through the process and help you understand your options.
- Understand the different types of bankruptcy: There are several different types of bankruptcy, including Chapter 7, Chapter 11, and Chapter 13. Each type of bankruptcy has its own requirements, advantages, and disadvantages, so it’s important to understand which type of bankruptcy is right for your business.
- Determine your eligibility for bankruptcy: To file for bankruptcy in Rhode Island, you must meet certain eligibility requirements, such as having a certain amount of debt and completing credit counseling. An attorney can help you determine whether you meet these requirements.
- Consider the long-term consequences: Bankruptcy can have significant long-term consequences for your business, such as damage to your credit score and potential difficulty obtaining credit in the future. It’s important to weigh these consequences against the benefits of filing for bankruptcy.
- Explore alternatives to bankruptcy: Bankruptcy should be considered a last resort, and there may be other options available to help your business address its financial challenges.
Will Bankruptcy Discharge All Debts?
In bankruptcy, not all debts can be discharged, meaning that the debtor is still responsible for paying them even after the bankruptcy case is over. Some common types of debts that are not discharged in bankruptcy are student loans, taxes, child support and alimony, debts incurred through fraud, fines and penalties, debts not listed in the bankruptcy petition, and debts from willful or malicious injury.
How Does Bankruptcy in Rhode Island Affect Your Credit Score and Future Ability to Get a Loan?
Filing for bankruptcy in Rhode Island can have a significant impact on your credit score and your ability to get a loan in the future. When you file for bankruptcy, it stays on your credit report for up to 10 years. This negative mark on your credit report can significantly lower your credit score and make it difficult for you to get approved for credit cards, loans, or other forms of financing. Additionally, lenders may view you as a higher risk borrower after bankruptcy, which could result in higher interest rates and fees if you are approved for a loan. Some lenders may also choose to deny your application altogether, depending on their lending policies.
Are Tax Debts Discharged?
Bankruptcy in Rhode Island can affect tax debts in several ways, depending on the specific circumstances of your case. If you owe federal or state income taxes, some of those taxes may be eligible for discharge in bankruptcy. Generally, to discharge tax debts, you must meet certain criteria, such as:
- The tax debt must be for income taxes only (not payroll taxes or other types of taxes)
- The tax return must have been due at least three years ago
- You must have filed the tax return at least two years ago
- The tax debt must have been assessed by the IRS or state at least 240 days before you file for bankruptcy
- You must not have committed tax fraud or willful evasion.
If you meet these criteria, some of your tax debts may be eligible for discharge in bankruptcy. However, it’s important to note that some taxes, such as property taxes, cannot be discharged in bankruptcy.
Will You Lose Your Home or Car in Bankruptcy in Rhode Island?
Whether or not you will lose your home or car in bankruptcy in Rhode Island depends on several factors, including the type of bankruptcy you file and the specific details of your case. In a Chapter 7 bankruptcy, your non-exempt assets may be liquidated to pay off your debts, which could include your home or car if they are not protected by exemptions. However, Rhode Island has a homestead exemption that can protect up to $500,000 in equity in your primary residence, which means that if you have less than $500,000 in equity in your home, you may be able to keep it in a Chapter 7 bankruptcy. Rhode Island also has a motor vehicle exemption of up to $12,000. In a Chapter 13 bankruptcy, you may be able to keep your home and car by repaying your debts through a court-approved repayment plan over a period of three to five years.
Statute of Limitations for Collections in Rhode Island
In Rhode Island, the statute of limitations for collections on most types of debt is 10 years from the date of the last activity on the account, such as a payment or charge. This means that after 10 years have passed without any activity, the creditor or debt collector can no longer sue you or take legal action to collect the debt. It’s important to note that the statute of limitations varies depending on the type of debt. For example, the statute of limitations for written contracts, such as credit card debt, is 10 years. For oral contracts, such as personal loans, the statute of limitations is also 10 years. However, for open-ended accounts, such as a line of credit, the statute of limitations is only 4 years.
Be Aware of The Cons
While bankruptcy can provide relief from overwhelming debt, there are also some potential cons to consider before filing for bankruptcy in Rhode Island:
- Damage to credit score: Filing for bankruptcy can have a significant negative impact on your credit score and remain on your credit report for up to 10 years. This can make it more difficult and expensive to obtain credit in the future.
- Loss of assets: Depending on the type of bankruptcy you file, you may be required to liquidate certain assets to pay off your debts. This can include your home, car, or other valuable possessions.
- Public record: Bankruptcy is a matter of public record, which means that anyone can access and view the details of your bankruptcy filing.
- Emotional toll: The process of filing for bankruptcy can be emotionally draining and stressful. It can also be difficult to come to terms with the fact that you are unable to repay your debts.
- Limited options: After filing for bankruptcy, you may have limited options for obtaining credit or financing for several years, which can impact your ability to make major purchases or investments.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Live To Regret Filing For Bankruptcy
There are several reasons why some people may regret filing for bankruptcy:
- Damage to credit score: As mentioned earlier, bankruptcy can have a significant negative impact on your credit score, making it more difficult and expensive to obtain credit in the future.
- Loss of assets: Depending on the type of bankruptcy you file, you may be required to liquidate certain assets to pay off your debts. If you are emotionally attached to these assets or rely on them for your livelihood, you may regret having to give them up.
- Public record: Bankruptcy is a matter of public record, which means that anyone can access and view the details of your bankruptcy filing. Some people may feel embarrassed or ashamed of their financial situation and regret having their bankruptcy be a matter of public record.
- Emotional toll: Filing for bankruptcy can be emotionally draining and stressful. It can also be difficult to come to terms with the fact that you are unable to repay your debts.
- Limited options: After filing for bankruptcy, you may have limited options for obtaining credit or financing for several years, which can impact your ability to make major purchases or investments.
Don’t Qualify For Bankruptcy? Don’t Panic
If you do not qualify for bankruptcy in Rhode Island, it may mean that you do not meet the eligibility criteria for filing under Chapter 7 or Chapter 13 bankruptcy. In this case, you may need to explore other options for managing your debt, such as debt settlement. Debt settlement involves negotiating with creditors to settle your debts for less than the full amount owed.
Learn more: What Are Your Options When You Don’t Qualify for Bankruptcy
Debt Settlement May Be a Better Option For a Number Of Reasons
- Avoiding bankruptcy stigma: Debt settlement does not carry the same stigma as bankruptcy, which can be important if you are concerned about the long-term impact on your reputation.
- Avoiding legal fees: Debt settlement may be less expensive than bankruptcy, as you may be able to negotiate directly with creditors and avoid hiring an attorney.
- Maintaining some control: With debt settlement, you may have more control over the process and the outcome compared to bankruptcy, as you can negotiate directly with creditors and potentially preserve some of your assets.
Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help
CuraDebt Is At Your Service
CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328