Will the Rhode Island Bankruptcy Court let me keep one Credit Card out of my Chapter 7 case?
The quick answer is no. When a debtor files a RI bankruptcy, she must list ALL of her debts. If there is a balance owed to anyone on the day her case is filed, she must list that creditor in her Rhode Island Chapter 7 bankruptcy petition.
Many filing for bankruptcy relief will ask me, a RI bankruptcy lawyer, for permission to leave just one card out, in case of a future emergency. I understand their fear. Because we live in a society run on credit, how would any of us survive on cash alone? Fortunately, there is good news.
As you may remember, the typical Rhode Island Chapter 7 bankruptcy takes about 90 days from the date of filing to the date of discharge. Once your case comes to completion and your debts are wiped out, your financial picture changes drastically for the better.
Most filing for RI bankruptcy relief see their credit score improve after a bankruptcy filing. The reason for this is because a credit score is based on the consumer’s debt to income ratio. By filing a Chapter 7 bankruptcy and destroying unsecured debt, you are improving this ratio and making yourself more credit-worthy.
After your RI bankruptcy case is over, don’t be surprised by the rush of credit card companies looking to do business with you. You are a good risk in their eyes not only because of your new credit score, but because you are unable to file a Chapter 7 bankruptcy again within the next eight years.
But what about debts owed to friends or family members?
All debts must be listed; even debts owed to friends and family members. It all comes down to whether the money was given to you as a gift, or as a loan. If it is a gift, as is often the case, then there is no debt and the friend or family member does not have to be listed as a creditor.
However, if the money was given as a loan, even if there were no formal promisory note (IOU) signed, the obligation must be listed in your bankruptcy petition. Be careful to think this matter through accurately. If you owe money to mom, she must be listed as your creditor.
One last piece of advice. At the bankruptcy hearing, and on the bankruptcy petition itself, you will be asked under penalties of perjury if you repaid any debts to friends or family members in the past year. Understand that the bankruptcy trustee has the power to request copies of your bank records. If you have repaid debts to friends or family members, you must fully disclose this information.