|
* Disclaimer:
- The information provided pertains to Chapter 7 consumer bankruptcy as it relates to
bankruptcy practice in Rhode Island. Bankruptcy law is promulgated by the federal
government and bankruptcy law in Rhode Island is going to be similar (but not exactly the
same) to bankruptcy law anywhere in the country. However, this information only applies to
Chapter 7 consumer debt and no other type of bankruptcy. Furthermore, this information is
not intended as a legal opinion or legal advice at all. The facts of every case are
different and give rise to issues that may not even be discussed here. You are urged to
consult an attorney who is licensed to practice in your area if you are considering
bankruptcy, and before you take any action. - Return
* What is Chapter 7 bankruptcy?
- Chapter 7 bankruptcy is a liquidation proceeding.
- The debtor turns over all non-exempt property to the bankruptcy trustee, who then
converts it to cash for distribution to the creditors. In many cases, all of the debtor's
property is exempt and there is nothing for the trustee to liquidate and no cash for the
debtors. For instance, a married couple is entitled to keep more than $30,000 in equity in their
home under the federal exemptions
- The debtor receives a discharge of all dischargeable debts. - Return
* Who is allowed to file a Chapter 7
bankruptcy?
- You must reside in Rhode Island for at least 6 months prior to filing.
- You must not have been granted a Chapter 7 discharge within the last 6 years or
completed a Chapter 13 plan.
- You must not have had a bankruptcy filing dismissed for cause within the last 180 days.
- It must not be a "substantial abuse" of Chapter 7 to grant the debtor relief.
If after you pay the monthly expenses for necessities there is not enough money to
pay the remaining monthly debts, then granting a discharge would not be an abuse of
Chapter 7.
- It would not be fundamentally unfair to grant the debtor relief under Chapter 7. - Return
* Can I discharge all of my debts?
- The underlying policy of bankruptcy law is that the honest debtor who is in debt beyond
his/her ability to repay the debt should be given a fresh start through the discharge of
debts in a bankruptcy proceeding.
- Not all debts are dischargeable. The following debts will not be discharged: Taxes;
Spousal and Child Support; Debts arising out of willful misconduct and or malicious
misconduct by the debtor; liability for injury or death from driving while intoxicated;
nondischargeable debts from a prior bankruptcy; most student loans;
Criminal fines and penalties and Forfeitures.
- Those debts which are secured will be discharged, however, expect the creditor to take
the necessary legal steps to take back the property. In most cases if the debtor's equity
interest in the property is exempt, the debtor may retain the property by redemption or
reaffirmation. - Return
* Will filing stop the bill
collectors from calling?
- Once you actually file for protection under Chapter 7, many creditor actions are stayed.
This means that all debt collection efforts and foreclosure are halted.
- Once a creditor or bill collector becomes aware that you have filed for bankruptcy
protection, he/she must stop all efforts to collect the debt. After your bankruptcy is
filed, the court mails a notice to all the creditors listed in your schedules. This
usually takes a couple of weeks. If this is not soon enough, then you should have your
representative inform the creditor immediately.
- If a creditor continues to use collection tactics once informed of the bankruptcy they
may be liable for court sanctions and attorney fees for this conduct. - Return
* I am married, do we both have to
file bankruptcy?
- No. In some cases where only one spouse has debts, or one spouse has debts that are not
dischargeable then it might be advisable to have only one spouse file. In cases where real
property is involved the question regarding a joint bankruptcy becomes a little more
complicated because a couple is allowed greater exemptions than a single person. - Return
* Will my employer find out about my
bankruptcy?
- Under normal circumstances, unless your employer is a creditor, your employer probably
will not know. However, the information is public record and can be revealed. In
Rhode Island, it seems that only business bankruptcies are published in the newspapers.- Return
* Can I keep my home and personal
property?
- As for real property in Rhode Island, depending upon which set of exemptions is used,
Rhode Island or Federal, you may exempt up to $15,000 in equity per individual, $30,000
for a married couple. When calculating your equity you should use a value that is based
upon a forced liquidation as opposed to the best selling conditions to arrive at a value
for your home. Once you determine this value, subtract the amount owed plus selling and
transfer costs from the value to calculate the equity. Any capital gains tax liability
should be deducted, as well.
- As for personal property, in Rhode Island, you are permitted exemptions for a variety of
personal property. This includes, automobiles, household furnishings and personal effects,
jewelry, tools of the trade, retirement plans, unmatured life insurance, personal injury
awards, earnings, animals and some other miscellaneous property. The value of each
exemption and which exemptions can be used are determined by the statutory exemption
scheme that is selected. - Return
* Can I keep my credit cards after
bankruptcy?
- Under some circumstances you may keep your credit cards. There are many factors which
must be considered, some of which include the credit card balance at the time of the
bankruptcy, what the credit card company is willing to do and your ability to pay the
present and future credit card debt. My experience in Rhode Island is that
unless the credit card is secured (e.g. Sears) or a store card (e.g. Jordan Marsh, etc.)
the credit card companies are not interested in letting you keep the credit card.
There are exeptions. - Return
* Will bankruptcy stop a wage
attachment or a foreclosure?
- Yes. However, a home is an asset usually secured by a mortgage deed. The lender is
entitled to apply to the court for relief from the automatic stay, the order preventing
creditor action by virtue of the bankruptcy under certain circumstances. Usually, if you
are current in your mortgage, and there is adequate equity security in your home you will
be allowed to reaffirm the mortgage and keep your home. If you are not current in
your mortgage, you may have to consider a Chapter 13. - Return
* Will bankruptcy discharge a
judgment or remove a lien?
- Yes. Most civil judgments are discharged by bankruptcy.
- Under some circumstances once the bankruptcy proceedings have started, a special motion
can be filed to remove certain liens. It will take a bankruptcy court order to remove
them. - Return
* Can I discharge a debt where I am
a co-signer?
- If the debt is a dischargeable debt then you will not have to pay it. However, the
cosigner will become primarily responsible for the debt. - Return
* Do I have to contact the creditors
and bill collectors?
- After your bankruptcy is filed, the court mails a notice to all the creditors listed in
your schedules. This usually takes a couple of weeks. If you need them to be notified
sooner, have your attorney inform the creditors directly. Once you have retained an
attorney, youmay tell any credit that contacts you to speak to him or her. - Return
* Are there any debts that I can't
discharge in bankruptcy?
- Yes, there are certain debts that are NOT dischargeable in bankruptcy. Generally, the
following debts will not be discharged: Taxes; Spousal and Child Support; Debts arising
out of willful misconduct and or malicious misconduct by the debtor; liability for injury
or death from driving while intoxicated; nondischargeable debts from a prior bankruptcy;
student loans and criminal fines, penalties and forfeitures.
- Those debts which are secured may be discharged, however, expect the creditor to take
the necessary legal steps to take back the property. In most cases if the debtor's equity
interest in the property is exempt, the debtor may retain the property by redemption or
reaffirmation. - Return
* How do I file for Chapter 7?
- There are several forms that must be filled out. You must follow the local and
federal bankruptcy court rules in completing the forms. Preparing these forms requires an
understanding of both bankruptcy law, local state law and the local federal rules in order
to enter the information correctly and accurately. The forms have to be typed and a
certain number of copies must be included with the filing. - Return
* Do I have to go to court?
- Not exactly. About 30 to 40 days after you file the bankruptcy you will have to attend a
hearing presided over by the bankruptcy trustee. This hearing is called the First Meeting
of Creditors. In Rhode Island the hearing is held in an office building and is very
informal. At this hearing the trustee will ask questions under oath regarding the content
of your bankruptcy papers, assets, debts and other matters. After the trustee is done,
your creditors will be permitted to question you. Your attorney will be there to represent
you and will help you prepare for the hearing. Sometimes, after your hearing is over,
various creditors will approach you to discuss the status of secured property or
your desire to retain a credit card. Your attorney can negotiate with them.
- After this hearing you will normally not need to return to court. However, if a creditor
files a motion or an adversary action, you may have to return to court. This is the
exception and your attorney can tell you if this is likely to happen. - Return
* How long after I file are my debts
discharged?
- Under normal circumstances, the bankruptcy court will automatically issue the discharge
60 to 75 days after the First Meeting of Creditors. - Return
* What if I forget to list a
creditor on my bankruptcy papers?
- It is a crime to intentionally omit a creditor from you filing. However, you are
permitted to file an amendment to your schedules up to a certain time before discharge. If
the amendment is timely filed then the omitted creditor is added to the bankruptcy. If you
do not know that a creditor exists and there are no assets for your creditors, the debt
probably will be discharged. - Return
* How does this effect my credit
rating?
- The bankruptcy is a judgment and will be listed for a period of up to 10 years.
However, there are ways to rebuild your credit. - Return
* After bankruptcy, can I get
credit?
- Yes, but this is up to each particular credit grantor. There are also ways to obtain
secured credit cards which require an initial cash outlay but may help you re-establish
your credit and enable you to eventually obtain unsecured credit. See below. - Return
* How do I re-establish my credit
after bankruptcy?
- There are at least two ways to get credit after a bankruptcy. First, one of your
existing creditors may continue to grant you credit based upon a reaffirmation agreement
made during the bankruptcy. Second, today there are several banks offering a secured
credit card. This means that the credit limit is based upon the amount of security given.
- There are professionals who specialize in the business of credit repair. Discuss this
with your attorney. If he/she does not do this, your attorney may be able to refer you to
someone. - Return
* Can I run up my credit cards and
then discharge them in bankruptcy?
- NO!
- Certain luxury purchases over $1000 within 60 days of the bankruptcy filing are presumed
nondischargeable.
- Cash advances aggregating $1000 within 60 days of the bankruptcy filing are presumed
nondischargeable.
- Debts involving materially false financial statements are nondischargeable under certain
circumstances.
- If you obtain credit if you knew or should have know that you couldn't pay it back, the
dischargeability of the debt may be challenged. - Return
* If I filed bankruptcy before, can
I do it again?
- You must wait 6 years to file again or if your bankruptcy was dismissed you must usually
wait for 180 days to refile. - Return
* Should I hire an attorney?
- The best person to help is your attorney. When you discuss your situation with your
attorney you will need to be prepared to discuss all areas of your case. This includes
each and every debt you owe and creditor you have. It is very important to list all your
creditors in your bankruptcy. One of the best ways to know all your creditors is to get a
credit report about your credit history. This should list the majority of your creditors,
even ones you did not know about. - Return
|
