Chapter 7 bankruptcy petitions are becoming more and more common, because they allow someone with unmanageable debt to find the breathing room to retain much of their personal property, while eliminating much of their consumer debt.
There are protections in place to allow these debtors to claim exemptions on personal property at both the federal and state level. Rhode Island allows residents to choose either of those options, although they cannot combine them. Which options are best for you?
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- Rhode Island state exemption – $12,000
In addition, someone filing Chapter 7 must continue to make payments on any vehicle loans that are secured by those vehicles. If they fail to do so, the lien holder has the right to repossess that property.
How to Keep Your Home
- Federal homestead exemption - $20,200
- Rhode Island state exemption – $300,000, as long as the homestead is occupied or the owners intend to occupy it as a primary residence
In order to retain this property, however, the homeowner also needs to continue making the mortgage payments agreed upon. Because this loan is secured by the property, if the homeowner defaults, even if the mortgage has been erased from the borrower’s credit record, the lien holder is entitled to foreclose.
Rhode Island allows exemptions for other forms of personal property:
- Clothing, furniture, beds and bedding, household goods and supplies – up to $9,600 total
- Jewelry – up to $2,000 total
- Books – up to $300 total
- A burial plot
- Debts owed to the filer which are secured by promissory notes or bills of exchange
- Prepaid tuition accounts
- Consumer cooperative association holdings – up to $50
- Tools of the trade – working tools – up to $1,500
- Libraries of practicing professionals
Filing Schedule C of a Bankruptcy Petition
Property exemptions are claimed on Schedule C of a bankruptcy petition. Those filing for Chapter 7 who fail to include this form, or fail to complete it correctly may not obtain all of the exemptions to which they are entitled. In addition, Rhode Island residents must specify whether they are claiming federal or state exemptions by including the following details:
- The property being claimed
- The federal or state statutes substantiating those property claims
- The property exemption value for each property claim
- Each property claim’s current assessed value (not the market value)
Getting Legal Help
Filing for bankruptcy is an emotional and, for some, embarrassing process to begin with. When the regulations and requirements are as detailed as those for modern bankruptcy petitions, it can be essential to have the help of a bankruptcy attorney who has helped many others navigate these difficult waters. Not only can they help ensure that all the legal requirements are met, they can help advise their clients of the best choices to make for optimal benefits each step of the way.
