As the men and women of Rhode Island continue to struggle against both the larger economic troubles affecting all residents of the United States and their own ever increasing consumer debt loads, Rhode Island households have turned to Chapter 7 and Chapter 13 bankruptcy programs in record numbers only to discover that they don’t actually know that much about the protection against unsecured debt balance they’d always presumed would be around to provide final (if credit report threatening) salvation to escalating credit card bills. To be sure, Rhode Island debtors who’ve already come to this page likely understand the extent of their troubles, and that’s the first stage of household budgetary reclamation. The recognition and appreciation of consumer debt loads that have grown to levels beyond the Rhode Island borrowers’ capacity for repayment is genuinely the most difficult aspect of debt removal, but the next step – the laborious homework that proper household financial management inevitably involves – should necessarily take the most time. For Rhode Island borrowers considering bankruptcy protection, this homework comes in the form of the initial bankruptcy petition and creditor matrix. More than anything else, this initial documentation of assets and debits shall be the determining factor of Chapter 7 legitimacy. In order to even qualify for debt elimination bankruptcy, the Rhode Island resident filing for protection must show that they haven’t earned more than the median income of citizens within their state. These numbers, if it even needs to be said, change every year, but, as of 2009, a single head of household within Rhode Island must have made less than forty seven thousand dollars to qualify for Chapter 7 bankruptcy: fifty nine thousand dollars for households with two members, sixty four thousand dollars for households with three member, eighty thousand dollars for households with four members, and households with additional members should throw another seven thousand upon the total for each.
Rhode Island residents who find that they are unable to qualify for Chapter 7 debt elimination bankruptcy will have no choice but to be shunted into the far less appealing Chapter 13 alternative – this program does little more than force the payback of the original loans under the rigorous budget implemented by the Rhode Island court trustee – but, nonetheless, the borrowers must take pains to represent their information without any factual errors. Preparing for the struggle against compound interest and predatory lenders requires accurate data about the hurdles of consumer finance and a thorough comprehension about the parameters of Chapter 7 and Chapter 13 bankruptcy protection following the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The more that Rhode Island borrowers know about the new regulations surrounding bankruptcy before meeting with their attorneys (who’ve become an integral part of bankruptcy protection for all but the most desperate Rhode Island households), the less money they’ll have to spend upon legal fees and the more likely that they’ll come through the process relatively unscathed. Too many Rhode Island borrowers, by hook or by crook, somehow forget to mention an asset or two only to find their bankruptcy case thrown out of the Rhode Island courts just before discharge of the credit burdens. For that matter, however improbable given the number of bankruptcy petitions currently being filed in every county of Rhode Island, borrowers could honestly face criminal prosecution for even accidental slips of the pen. Also, it’s not just tangible possessions that will raise the eyebrows of the court officials analyzing the documents. Most Rhode Island residents already understand that they can’t so easily hide a boat or car or entertainment center (or, sadly, wedding band or heirloom sculpture or ancestor’s pocket watch), but, actually, the simplest fudges to catch are those assets that aren’t yet held by the Rhode Island consumers filing for Chapter 7 bankruptcy protection. Any anticipated financial windfall, whether a lawsuit already in progress or a planned tax refund or some other sort of settlement that leads the borrower to knowingly or not flirt with criminal fraud.
To take just one instance, the guidelines on forthcoming tax refund may well seem too complex for ordinary Rhode Island borrowers to easily comprehend (and, as with seemingly every portion of the United States Bankruptcy Code, the regulations only grow more complicated with every passing year), but those Rhode Island consumers intending to declare for bankruptcy protection should have precise figures at hand regarding their family’s gross annual income, their estimated Earned Income tax credit, their Child Tax credit if applicable, and the months they had actually worked during the year previous to filing. In many cases, the Rhode Island borrowers considering Chapter 7 bankruptcy protection should actually wait to turn in their petition after they’d received and spent the refund so long as the purchase would be covered under Rhode Island exemptions. Once again, though, the learned wisdom of bankruptcy lawyers should be thought essential to any such decision since Rhode Island trustees maintain the power to not only deny Chapter 7 bankruptcy protection to borrowers that willfully disregard the state and federal statutes but also, if the filers used their funds for a sudden and substantial payment to one lender, reclaim said payment when deemed preferential. It’s utterly vital that every Rhode Island borrower filling out the bankruptcy petition takes the time to ensure that all documentation has been verified beyond the merest whiff of suspicion. Always presume that inaccuracies shall be discovered and that the worst shall happen.
To that end, the absolutely most troubling mistake that borrowers in Rhode Island could make in the course of filling out those documents essential for Chapter 7 or Chapter 13 bankruptcy protection would be to leave off of the appropriate paperwork any household property that could later be judged by the government to be an asset of record. Whether the borrowers’ slip ups were due to laziness or something more purposeful – regardless, borrowers should never assume the Rhode Island courts would presume any lapses to be purely from sloppiness or misunderstandings – these sorts of errors do not merely lead to the immediate dismissal of the bankruptcy case. Should the Rhode Island trustee believe the borrower’s omission to be purposeful, the lazily compiled petition could be deemed intentional fraud and the filer could genuinely be sentenced to prison. This, obviously, should be considered the gravest scenario for any Rhode Island consumers planning bankruptcy protection, but, above and beyond the criminal penalties that sketchy documentation may cause, the Rhode Island households that most fear government intervention may actually not have to worry about their family’s possessions because of the separate schedule of exemptions granted our citizenry by the state legislature. Every American undergoing bankruptcy declaration knows that they may be forced to yield their most highly priced possessions to the caprice of the trustee chosen by the county court, but Rhode Island borrowers should be considered relatively lucky when the protections peculiar to their state bankruptcy code are compared to the federal scheme of exemptions.
Borrowers looking into the potential drawbacks that Chapter 7 debt elimination bankruptcy holds will have to decide upon either those federal exemptions or the ones provided by Rhode Island’s regulation, but, for the grand majority of our state’s consumers, the choice really shouldn’t be that difficult to make. Under the various homestead exemptions, to take just one example, the United States government does safeguard most sorts of residences – from mobile homes to co-ops – just so long as the equity’s below twenty thousand dollars. For borrowers who’ve selected the Rhode Island slate of exemptions, they won’t have to worry about their home as long as the equity is under two HUNDRED thousand dollars and the property was purchased in the last twelve hundred days (for property purchased more recently, the applicable equity slips a bit to a still impressive one hundred and twenty five thousand dollars), and, with the real estate market in Providence and the rest of Rhode Island continuing to fall, that should certainly take care of most every family who requires the need for Chapter 7 debt liquidation bankruptcy. There’s a separate exemption for motor vehicles which allows up to ten thousand dollars of the value of the automobile once the loan’s taken into account, and something similar for jewelry that protects the wedding ring – to take one of the more egregious examples that Rhode Island households reasonably stress over losing – of a Rhode Island household even during bankruptcy.
Furthermore, residents of our state will be able to keep all clothing, a family burial plot, the family library including the family bible and educational tomes (to a limit of three hundred dollars), tools of trade such as professional implements and vocational literature (to a limit of twelve hundred dollars), and household furnishings and family members’ assorted possessions (to a limit of eighty six hundred dollars). Charitable wages are also exempted as are the wages of other family members besides the head of household and life insurance or accident insurance proceeds. Almost every form of public assistance – workman’s compensation, unemployment insurance, disability benefits – should also be guaranteed. In most cases, funds that have specifically been saved into a prepaid tuition account will be okay, but, under some circumstances, the Rhode Island trustee could reduce the funds under a court judgment. Here again, the help of experienced attorneys should be considered vital to success of the program and minimizing the loss of assets for the family. Individual retirement accounts, pensions, and annuities (aside from support ordered by the Rhode Island courts) are exempt only if they are qualified by the bankruptcy authorities studying the borrowers’ original petition, but it’s extraordinarily difficult for average borrowers without financial training to ensure that the exemptions would be relevant without legal counsel. Of course, with attorney fees escalating exponentially given the new demand for their services and the limitations upon borrower’ income imposed by the BAPCA legislation which prevents so many Rhode Island residents from attempting Chapter 7 protection, many Rhode Island borrowers are tragically deemed either too rich or too poor for bankruptcy under the new laws.
Given the aforementioned problems, many of our residents have been examining the various alternatives to bankruptcy newly available around Rhode Island. Consumer Credit Counseling, though growing in popularity at least partially due to the glut of television commercials advertising the service as a way to protect borrowers’ credit ratings, has been shown to actually lower FICO scores with the same destructive capacity as Chapter 7 bankruptcy protection. Since Consumer Credit Counseling programs do little to lower the actual unsecured bills of the Rhode Island borrowers utilizing the program (small wonder that so many of them are subsidized by the giant credit card companies), entrance to these programs should be discouraged, but there’s another superficially similar form of debt management that, while less well known to most Rhode Island consumer at this point, has actually demonstrated an exceedingly successful track record among borrowers of our state. Debt settlement, should the borrowers be accepted into the program and the creditors be agreeable to negotiation, actively reduces the amount of money that the borrowers owe through just a series of phone calls to representatives of the lenders by marrying the threat of Chapter 7 bankruptcy protection (even if that threat is wildly misplaced) and the promise of a full and swift repayment of the funds that would remain following the program’s close: around thirty to fifty percent of the original accounts. Debt settlement has it’s own associated costs to be satisfied alongside the new payment schedule, the program’s still so new that most residents of Rhode Island will be forced to find certified settlement specialists on line, but, given the problems of bankruptcy protection in 2009, Rhode Island borrowers who determine that Chapter 7 debt elimination will be unlikely to truly help their families should find the settlement negotiation program a more than rewarding solution to their growing financial burdens.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
