Property you can keep if you file for bankruptcy in Rhode Island

by JOSHUA R KARNS on Jul. 13, 2020

Bankruptcy & Debt Bankruptcy Bankruptcy & Debt  Credit & Debt Bankruptcy & Debt  Collection 

Summary: Most people who file personal bankruptcy cases in Rhode Island get to keep their home and everything else that they own because the property is considered exempt by either federal or Rhode Island state law. These are considered non-asset cases because the creditors don’t receive any money. If your property is not exempt the bankruptcy case trustee can sell the property to repay your debts. An experienced Rhode Island bankruptcy attorney can ensure that you take advantage of every exemption you are legally entitled to use in your bankruptcy case.

What are bankruptcy exemptions?

When you file your bankruptcy case you must list all of the property that you own.  Your property will be considered either exempt or non-exempt.  In a Chapter 7 bankruptcy case the trustee may sell your non-exempt property to pay off your debts.  If your property is exempt you can keep it.  You will be allowed to use a list of exemptions to keep your property from being sold to pay your creditors.  Exemptions might allow you to keep your home, car and even money in your checking account.  You list the exemptions that you can use by listing the statute and the property and its value that the exemption applies to.  If you meet the requirements under the bankruptcy code to file a case in Rhode Island you can choose between the Federal exemptions or the Rhode Island state exemptions.  The major difference between the Federal bankruptcy exemptions and the Rhode Island state exemptions is the homestead exemption which allows you to keep the home that you live in.

Bankruptcy Schedule C

Even if you are allowed to exempt certain property it will not happen automatically.  You must properly list the property and the statute that exempts it on Schedule C.  If you don’t the trustee is permitted to sell the property unless you amend your court documents to include the exemption.  

Who can use the Rhode Island bankruptcy exemptions?

Not everyone can use the Rhode Island bankruptcy exemptions.  To use the Rhode Island bankruptcy exemptions you must be a resident of Rhode Island.  If you have been living in Rhode Island for 2 years and file your bankruptcy case in Rhode Island you can use the Rhode Island bankruptcy exemptions.  If you have not been living in Rhode Island for the past 730 days (2 years), you would use the exemptions allowed by the state where you lived for the longest period of time during the 180 days before you file your bankruptcy case.  Determining what bankruptcy exemptions you are allowed to use, what bankruptcy exemptions would be best for you or if you should wait to file your bankruptcy case can be very complicated.

Federal law requires that residents have lived in a State for two years before their bankruptcy case was filed in order to claim that State’s exemptions.  If you have not lived in your State for the two years prior to filing your case, then you must claim the exemptions provided by the State where your lived for the greater part of the six months between two years and two and a half years prior to filing your case.

The Rhode Island homestead exemption

The Rhode Island homestead exemption is $500,000 while the Federal homestead exemption is currently only $23,625.  Married couples may not double the Rhode Island homestead exemption.  It applies to the equity you have in the property so if you have a mortgage or other home loan your property is worth that much less.  You must be living in home and using it as your principal residence to use the exemption.  

If you have not owned your home for 40 months prior to filing your bankruptcy case federal law limits your homestead exemption to $170,350 unless you sold a home and used the proceeds to buy a new home in the same state and ownership times of both homes adds up to 40 months.  

Rhode Island bankruptcy exemptions

If you use the Rhode Island bankruptcy exemptions you can exempt the following in addition to the $500,000 homestead exemption.

  1. Wildcard of $6,500
  2. Cars and other vehicles up to $12,000
  3. Clothing
  4. Jewelry up to $2,000
  5. Work tools up to $2,000
  6. Furniture, beds and other household goods up to $9,600
  7. Books up to $300
  8. Burial lot
  9. Wages owed to a sailor
  10. Debts secured by bills of exchange or negotiable promissory notes.
  11. The entire salary or wages of any debtor due or payable from any charitable corporation,
  12. The entire wages or salary of any debtor due or payable from any employer, where the debtor has been the object of relief from any state, federal, or municipal corporation or agency for a period of one year from and after the time when the debtor ceases to be the object of such relief.
  13. The salary or wages due or payable to any other debtor, not exceeding the sum of fifty dollars ($50.00).
  14. The salary and wages of the wife and the minor children of any debtor.
  15. An individual retirement account or individual retirement annuity
  16. The right or interest of a person in an annuity, pension, profit sharing, or other retirement plan protected by ERISA.
  17. An account balance, right, or interest of a person in a prepaid tuition program or a tuition savings program.

Current Federal Bankruptcy Exemptions

  1. Homestead exemption:  $23,675.  If you do not use all of the homestead exemption you can use up to $11,850 of it on anything.  
  2. Vehicles up to $3,775.
  3. Household goods, appliances, furnishings, clothing and musical instruments up to $12,625 total.
  4. Jewelry up to $1,600.
  5. $1,250 to be used on anything
  6. Health aids
  7. Personal injury recovery up to $23,675 but not for pain and suffering or pecuniary loss.
  8. Lost earnings payments
  9. Tax exempt retirement accounts like 401(k)’s and 403(b)’s
  10. IRA’s and Roth IRA’s up to $1,283,025.
  11. Public assistance, social security, veteran’s benefits and unemployment compensation.
  12. Crime victim’s compensation
  13. Work tools and books up to $2,375.
  14. Alimony and child support
  15. Life insurance policy with loan value up to $12,625.
  16. Disability, unemployment and illness benefits.
  17. Life insurance payments for a person you depended on, which you need for support.

If you are married and filing jointly, you may double all of the federal bankruptcy exemptions. For example, you may claim a homestead exemption of $47,350.  

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