Rhode Island Bankruptcy Information Center

Recently I met a young woman – a recent immigrant to this country – who had met with another attorney before meeting with me. Her case was relatively simple, so I was surprised to learn her first attorney had proposed a fee of $5,000. When I told her my fee was only $985, she was absolutely shocked.

I’m unaware of any Rhode Island attorney who charges less than me to file a personal bankruptcy. The typical going attorney rate is probably $1,200 to $1,500 (not counting the $306 filing fee going to the court). I personally think that an attorney’s fee of $1,200 is reasonable and fair – given the amount of work that is involved in handling a Chapter 7 bankruptcy filing correctly. And for particularly complex cases, fees of $1,500 or higher may be appropriate. (Consumers beware: the RI Bankruptcy Court actually restricts attorneys from charging more than $1,500 for a Chapter 7 filing without prior court approval.) Also, some attorneys (including myself) offer discounts to seniors and others with extremely simple cases.

Oftentimes not. In Rhode Island you can include your husband (or wife) in a bankruptcy filing at no extra charge from the court. The court filing fee is the same as if you were filing bankruptcy alone. And as for attorney fees, at my office we typically don’t charge additional fees for adding a spouse to a bankruptcy.

Even so, there are certain situations when it makes more sense for a couple to file bankruptcy separately. You’ll want to consult with an attorney experienced with bankruptcy to determine what would work best for both you and your partner.

If you owe federal or state income taxes from past years, you may be able to get rid of them by filing a RI bankruptcy. Generally speaking, you must wait three (3) years from the date the IRS / RI Division of Taxation processed your income tax return. (Note: this will likely be after the date you filed your tax return.) A Rhode Island attorney experienced with bankruptcy will be able to help you figure out when exactly you’re eligible to eliminate your past-due income taxes in a bankruptcy.

Rhode Island’s bankruptcy laws are generous as to what belongings you’re allowed to keep (exempt) after filing bankruptcy. In fact, it’s rare for anyone to lose a house, car or anything else in a RI bankruptcy filing (assuming they’ve hired an experienced RI bankruptcy attorney).

Generally speaking, you can file bankruptcy in Rhode Island if you’ve live here for the last 6 months. So for example if you’ve lived in Warwick, RI for the last 180 days, you can file in the District of Rhode Island.

There is a catch, however, if you’ve recently moved here from out-of-state. Even if you’ve lived here for over 180 days, you may still be under your old state’s laws in terms of what things you’re allowed to keep after the bankruptcy.

Bottom line: the longer you’ve lived here, the better. You’ll want to consult with a Rhode Island attorney experienced with bankruptcy to ensure you’re eligible to keep your house, car, and other belongings through a RI bankruptcy.

When you file bankruptcy in Rhode Island, you should list everyone you owe money to. If you fail to list a creditor, you risk not getting off the hook for that particular debt.  How can you avoid leaving a creditor out of your bankruptcy filing? Typically a credit report will identify most of your creditors. (Once every 12 months you can order a free credit report through annualcreditreport.com, or by calling 877-322-8228.)

However, not all debts will appear on your credit report. Medical bills, utility bills, and cell phone bills are often missing from credit reports, as are outstanding gym membership fees, unpaid magazine subscriptions, etc. In addition, debts that have been unpaid for more than seven years may stop showing up on a credit report. But if you don’t list them they might come back to haunt you after your bankruptcy (for the original amount plus a lot of interest accrued in the hands of some local collection agency– after the original creditor “charged off” the debt).

If you do accidentally fail to list a creditor when filing for Chapter 7 bankruptcy, it’s often possible to go back and amend (fix) your bankruptcy papers to include the missing creditor within 90 days after you file, though a $26 court fee will apply. Beyond 90 days, a heftier court fee ($260) will apply, and there are some situations where adding a missing creditor may not even be allowed. Chapter 13 (payment-plan type) bankruptcies can be even more risky to have to add a missing creditor.

Generally speaking, yes — Rhode Islanders who are unemployed can file for bankruptcy, even if they’re still getting unemployment payments. Of course, you’ll want to make sure that you’re eligible to file a wipe-it-all-clean Chapter 7 bankruptcy (versus a Chapter 13 payment plan bankruptcy). Also, if you have a worker’s compensation claim or are suing your former employer for wrongful discharge, this may complicate things a bit. But a Rhode Island attorney experienced with bankruptcy should be able to sort out these details for you.

Most people do NOT need to appear before a judge in order to complete their bankruptcy in Rhode Island. But they do need to attend a Section 341 Meeting of Creditors, which is run by a bankruptcy trustee (not a judge) who has been appointed to administer their case. Typically, the trustee will ask for ID (so remember to bring your drivers license and social security card). Then the trustee will spend several minutes asking you questions about what you own, your debts, income, etc.

If you’ve retained a good attorney, however, you won’t be alone. I attend this meeting with every one of my clients, and it’s rare for there to be any issues. In fact, most creditors don’t even bother coming. This Meeting of Creditors is held on weekday afternoons at the Federal Center, 380 Westminster Street, 6th Floor, in downtown Providence, and usually lasts for only a few minutes.

People who are considering filing bankruptcy with me often ask what to bring for our first meeting. (If you’re interested in scheduling a free initial consultation to see if bankruptcy is a good option for you, call my office at 401.738.3030 today.) The purpose of this first meeting is to ensure that we’re both comfortable that going forward with a bankruptcy filing makes sense in your specific situation. So it’s generally helpful if you can bring in your recent bills, collection notices, and any lawsuit-related papers, as well as any other documents that you’d like me to take a look at. At the end of the meeting, I can give you a checklist so you’ll know exactly what information my office will need from you in order to get your case prepared and filed.

Many clients who come to me to discuss their bankruptcy options have previously tried other means of resolving their overwhelming debt issues. Most often these clients have attempted to work with a debt settlement company. Debt settlement is a process which attempts to get the credit card companies to accept less than 100% of what they are owed on a credit card debt. Ordinarily, the credit card companies are only willing to offer a discount if the credit card payments are seriously (many months) delinquent. They generally insist on receiving the full amount of the settlement within one to three months. This makes it very difficult for people to settle credit cards on their own, because they have to accumulate a fairly large amount of money to have available as a settlement funds. The debt settlement companies deal with this by insisting as part of your contract with them that you pay them a hefty amount each month to eventually build a settlement fund.  Typically, however, the first $3,500 they receive from you is applied to their fee. Only then does your “settlement fund” start to build. Problems with the debt settlement alternative include the following:

• some of the outfits in debt settlement business are disreputable fly-by-nights
• the fees are often quite steep
• assuming that they are able arrange some settlements, by the time these settlements start coming through, you will likely have dealt with many months of creditor harassment, and may be facing lawsuits, wage attachments, and liens on your home
• there will likely be a very material negative impact on your credit score
• generally speaking, unlike the situation with bankruptcy, when debt is discharged in the context of a debt settlement, the amount that the creditor agrees to write off will be reported as income to you to the tax authorities so you will be paying taxes on the amount that is forgiven
• if you become dissatisfied with the way things are going with your debt settlement program (for example if lawsuits start being filed against you) and you want out, it may be difficult to get a meaningful refund.

I should caution that because of the nature of my practice, I rarely see success stories with debt settlement alternatives. That doesn’t mean they don’t exist and the purpose of this post is not to dissuade you from checking into the debt settlement alternative. However, just like everything else, you should proceed cautiously - ask a lot of questions, insist on getting everything in writing, read the fine print, and be comfortable with the refund policy if things get ugly. Most importantly be sure that you are dealing with a reputable company – remember - just because they advertise on the radio or television does not guarantee that they are legitimate.

It is rare for someone who is represented by a bankruptcy attorney to lose their property (home, personal possessions, retirement plans, etc.) as a result of a bankruptcy filed in Rhode Island. The Rhode Island statute dealing with what you are allowed to keep or “exempt” in spite of a bankruptcy filing has some particularly generous provisions. You can often keep or “exempt” the following items (up to set dollar limits) from being taken from you as a result of a bankruptcy filing in Rhode Island:

•    the home where you live
•    one or more vehicles
•    furniture, home electronics, and other household items
•    clothing
•    jewelry
•    office equipment
•    401ks, IRAs and various other types of retirement accounts
•    Cash, bank account balances, and cash equivalent assets

If you are considering filing bankruptcy and own real estate or other significant assets, you owe it to yourself to speak to an attorney who specializes in bankruptcy law before assuming that all of your assets will be exempt. I offer free initial consultations and often can determine during this first meeting if there is a risk of assets being lost as a result of a bankruptcy filing. Please feel free to give me a call to schedule an appointment to discuss your particular situation.