Name: Attorney Mark Buckley, CFP
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Filing Chapter 7 Bankruptcy in Rhode Island: Not A Moral Issue

I don’t know anyone in Rhode Island who thinks filing for bankruptcy is taking the easy way out. I’ve yet to converse with anyone who wanted to file a Chapter 7 bankruptcy as a way to cheat credit card companies, or to seek revenge for high interest rates.

Who Files Bankruptcy in Rhode Island?

My clients come from from every part of Rhode Island. They are young, old and all the stages in between. Some have little schooling, while others have college degrees including masters and doctorates. What I have encountered are trustworthy, diligent people who feel trapped by too much debt.

They want to do the right thing and repay their debt, but they simply can’t. With so much debt, they are stuck. They are unable to move forward.

Family welfare and personal health soon begin to suffer. With overwhelming guilt, these people have become slaves to their debt and are afraid to ask for help. They believe others will judge them as immoral for filing a Chapter 7 bankruptcy. Despite their best efforts, they are going over the financial waterfall and there is no catching up.

Many things can prevent an honest debtor from paying his bills: job loss, a medical crisis, a loss of overtime at work, a divorce, a change in interest rates. Any one of these events can send a person running to a bankruptcy lawyer, dejected and embarrassed.

Is Filing Bankruptcy A Moral Issue?

So when did filing bankruptcy become a moral issue? Because most Americans come from a Christian or other strong spiritual tradition, we value honesty and integrity in our personal and business dealings. We may even be familiar with a verse in the Old Testament book of Psalms which says, “The wicked person borrows but does not pay back.” Does this suggest that all debt must be repaid, no matter the circumstance?

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Rhode Island Bankruptcy Information

You’ve done your best to repay creditors, but now there is not enough money to go around. Interest rates have skyrocketed, minimum payments have tripled, and you’ve fallen behind on several accounts. If you need to protect your house, your car, and stop all collection activity, will filing bankruptcy help?

If bankruptcy is the solution, will you be filing a Chapter 7 or a Chapter 13 case?

To understand the differences between these two options, let me try to paint a picture. Imagine standing outside the US Bankruptcy Court with all of your bills in hand. As your stare at the building, you notice there are only two doors to gain entrance; one door is very narrow while the second door is very wide. Its easy to see that one door is designed to keep people out and the other seems to let everyone in. Which door should you try to enter?

Well, the narrow doorway is like a Chapter 7 bankruptcy. People who earn too much income will not be able to enter and cannot file a Chapter 7 case. Only those whose gross household income (during the prior 6 months) falls below the median income (of other similar households) are permitted to file a Chapter 7 bankruptcy. A Chapter 7 bankruptcy takes 90-100 days, costs less money than a Chapter 13, and allows you to discharge most debts. Even though the doorway appears narrow, about 92% of bankruptcy filers in Rhode Island qualify and are able to enter for debt relief.

To understand a Chapter 7 case better, lets consider the following example. The median 6-month income for a Rhode Island 4-person household is presently $ 43,501 gross (0r $ 87,002 annually). If your 4-person household gross income in the past 6 months (not including Social Security income, or unemployment benefits) is lower than $ 43,501, you can enter the narrow doorway of a Chapter 7 bankruptcy. Just remember that you cannot enter the Chapter 7 doorway twice within in eight year period and time is measured from the date of your prior filing.

So what is the other doorway and why is it so wide? The second door leads to a Chapter 13 filing and is wide because bankruptcy law encourages the repayment of debt where there is ability. A Chapter 13 petition is, essentially, a 5 year repayment plan and is for those who either earn too much income, or are trying to protect property that could be lost in a Chapter 7 case. In Rhode Island, less than 10% of all bankruptcy cases are of the Chapter 13 variety.

I hope you now understand your choices a little better. It really comes down to your household income and your ability, or inability, to repay unsecured creditors. While its possible to file a Chapter 7 bankruptcy if your income is higher than the median income, I would need to perform an analysis and ask you a number of questions to see if you qualify for immediate debt relief. If you show me your pay-stubs for the prior 6 months, I can let you know your options. We can also develop a plan for filing down the road if your income is only temporarily high.

RI Bankruptcy Law:Preparing to File a Chapter 7 Bankruptcy

Bankruptcy is never anyone’s first choice. But, if you live in Rhode Island and are drowning in debt, there are some simple steps you should take TODAY to prepare for the possibility of a Chapter 7 bankruptcy. Here are just a few ways to make life less stressful for both of us.

Stop the insanity. Do not use your credit cards anymore for anything . . . . including everyday living expenses.

If we work together, I must know about every purchase made in the past 90 days.
You should make no less than 3 payments after a major purchase, cash advance or balance transfer. Depending on your circumstances, I may advise making a few more payments, or waiting a few months before filing your case.
Keep away from your 401k plans and other retirement accounts. A recent distribution may jeopardize your case.
Don’t get clever with your property. You cannot take your name off of deeds to real estate, or other valuable property without causing major problems.
Obtain your income tax records for the past two years.
Gather copies of all pay-stubs for the prior 6 month period. Continue to collect them going forward.
Be private. Do not divulge your plans to any debt collector. They may decide to go after your bank accounts now if they think you are filing bankruptcy next month.
Keep paying on your house and car if you intend to keep this property. You should try to get current on these obligations before filing your case.
For homeowners, perform a title examination. I need to know if there are judgment liens against any real estate.
Don’t play favorites. You should not pay more than $ 200 back to friends and family members in the past year.
Be prepared to disclose all property that you may have any interest in. Is your name on a parent’s bank account, or real estate? Are you owed money by anyone for any reason?
Request your free credit reports at http://www.annualcreditreport.com to identify all creditors.
Start saving money for your Chapter 7 bankruptcy case. Although I provide a free telephone consultation, I cannot file your case until all fees are paid in full.
Call me TODAY with all of your questions. I will give you my honest assessment, then you will understand what needs to be done to get out of debt once and for all.

Filing Bankruptcy in Rhode Island

In Rhode Island, there almost 5,900 lawyers for a population of 1,050,788 people. We could easily fill the Providence Performing Arts Center (PPAC) to capacity . . . . . . TWICE.

If you needed to file bankruptcy in Rhode Island, could you imagine standing on the stage of PPAC trying to figure out which lawyer in the crowd was the ideal choice?

Bottom line: there is no shortage of lawyers willing to take your bankruptcy case.

So, where do you begin? Do you call the lawyer with the biggest bankruptcy advertisement, or do you take the bargain-basement lawyer who advertises on place-mats at your favorite Chinese restaurant?

Here is a better approach. Go for the most experienced lawyer you can afford.

Just as you would not hire a dentist whose only tools were pliers and a bucket, neither should you hire a bankruptcy lawyer without first seeing if he has the tools necessary to represent you.

Here are just a few questions to ask:

Is he really just a general practice lawyer? I believe a debtor is best represented by an attorney who devotes his entire practice to bankruptcy.
How long has he been practicing bankruptcy law? If he just changed his personal injury law firm to a “bankruptcy boutique” last week, you should know.
How many bankruptcy cases has he personally handled? Would you feel better knowing he has handled a few cases like yours, or a few hundred cases like yours?
Who will do most of the work? Does he just spend 30 minutes with you on the initial consultation then his secretary takes over? Are you filling out lengthy questionnaires with little to no access to the attorney?
Who will represent you at the creditor’s meeting? Will you be disappointed if an attorney you’ve never spoken to before represents you at your hearing, because the lawyer you hired is too busy to attend?
Are his fees comparable to what other experienced bankruptcy lawyers are charging? Not too low, not too high.

Like most things in life, you get what you pay for. An experienced bankruptcy lawyer will save you money by avoiding costly mistakes and offer you the peace of mind in knowing that your case is handled properly and professionally.

Bankruptcy Laws Can Protect Your House

In a recent video by ABC6 News, it was suggested that a person could lose their house if they file a Chapter 7 bankruptcy. While there are limits to how much equity can be protected, the statement was misleading.

The process is actually easy to understand and is designed to protect most homeowners who need bankruptcy relief. Let me explain how you can keep your house and still file bankruptcy.

Under Rhode Island bankruptcy law, a debtor stands at a fork in the road when it comes to protecting real estate. He can choose either Federal or Rhode Island exemption laws. Both laws allow a debtor to protect a certain amount of equity in his house.

As a reminder, equity is the difference between what a house is worth and the remaining money owed on the mortgage. In other words, it represents that portion of the home that the debtor truly owns. For example, if a house is worth $ 350,000, but there is $ 275,000 mortgage balance, there is $ 75,000 worth of equity in the house.

For clarification, here is the better question to ask: How much equity can a RI debtor protect in his house?

If a debtor has lived in RI long enough, he can protect up to $ 300,000 of equity in his principal residence under RIGL 9-26-4.1. This is known as the homestead exemption.

Under Federal exemption law 11 USC 522(d)(1), a debtor may protect up to $ 20,200 in equity as an individual, and $ 40,400 in equity if filing bankruptcy jointly with a spouse.

The debtor must make a choice. Will he benefit more by using Federal exemption laws that are more generous in other property categories, or will he do better with RI laws that offer deeper protection in fewer property categories?

In addition to getting accurate market data on the house, an analysis must be performed by a qualified attorney to determine which laws will accomplish the greater protection.

In reality, it is very rare for a person to lose their home in bankruptcy. The reason for this is that most debtors do not have substantial equity in their homes. With real estate prices plummeting these past few years, and heavy mortgage refinancing prior to that, most homeowners have seen their equity go down.

Bottom line, there is plenty of protection available for most homeowners trying to protect the roof over their heads. There is no need to fear that the process is arbitrary. It is pretty cut and dried. You can know that your house is protected even before your bankruptcy case is filed.

I have represented thousands of home owners who were able to wipe out unpayable debt and STILL KEEP THEIR HOUSE.

If you want to understand how you can protect your house and still file for bankruptcy relief, give me a call at 467-6800, or request a free consultation following the link below.