Category Archives: chapter 7

Can I keep my tax refund if I file for bankruptcy?

People sometimes ask if they’ll be able to keep their tax refund after they file for bankruptcy in Rhode Island.

The answer is generally yes — in most cases, an attorney experienced in bankruptcy will find a way to protect all but the largest tax refunds from being lost to creditors in a bankruptcy.

IMPORTANT! the most common issue we’ve seen people encounter with tax refunds and bankruptcy is NOT with finding ways to keep the refund. Instead, it’s with people using the refund funds to pay back loans inappropriately (at least from the court’s perspective) around the time they file.
See below for details…

To protect the tax refund, attorneys often make use of something called the wildcard exemption, which allows you to protect your cash and other miscellaneous assets through a bankruptcy.

How much of your refund you can protect depends on several factors, such as whether you’re trying to protect real estate, and whether you elect to file with the federal or state exemptions (explained below).

Is my tax refund too big to protect?

When you go to file a Chapter 7 bankruptcy in Rhode Island, you’ll need to make a decision as to whether you’re going to use the Federal or State exemptions. Each has advantages and disadvantages. But you can’t use both in the same bankruptcy.

Rhode Islanders typically use the state exemptions when they’re trying to protect their home equity (up to $500,000). If you go this route, you may opt to use the state Wildcard exemption to protect a tax refund up to $6,000.

On the other hand, if you’re not trying to protect real estate it might make more sense to use the federal exemptions to protect up to $13,100.

federal exemptions may save more tax refund than state exemptions

Two is better than one!

And if you’re married, you may be able to double the amount covered under the federal exemptions: $26,200!

Details, details…

In the RARE case that you’re trying to protect real estate AND use the federal exemptions, it gets a little more complicated. But you’ll still end up being able to exempt at least $1,250 in addition to up to $11,850 of the federal homestead exemption which you didn’t use.

Moreover, these are general principles and the amounts available may vary depending on other circumstances of your individual case.

For example, if you’re also trying to use the wildcard exemption to protect other assets (e.g. a savings account), less will be available to protect your tax refund.

Also, we didn’t really discuss how this applies to Chapter 13 (payment plan) bankruptcies.

Be careful about repaying personal loans with a tax refund!

One common pitfall people fall into is using their tax refund to repay family or personal loans immediately before they file for bankruptcy. For instance, let’s say you have $5,000 you owe dad plus $45,000 in credit card debt. When you receive a large tax refund you might consider paying back dad his $5,000 with your tax refund, but this could lead to problems…

It’s an issue because you’re giving one creditor (your dad) special treatment over the others (the credit card lenders). And to the trustee assigned to oversee your bankruptcy cases, this isn’t okay. In this example, your dad may be required to pay back the money to the bankruptcy trustee.

Instead, it’s often simply better to save yourself a headache and simply protect the tax refund with your exemption and wait for the bankruptcy proceedings to be completed before using any money to repay family loans. At that point, the legal obligation is eliminated, but then it’s okay to pay back the loan (even though the legal obligation was removed via the bankruptcy). And it makes for a better thankgiving family dinner as well.

How quickly can I file bankruptcy in Rhode Island?

Rhode Island Bankruptcy Attorneys can file cases 24-7The Rhode Island Bankruptcy Court allows cases to be filed very quickly. If you submit the necessary papers and filing fees, an experienced attorney may be able file your case in less than 24 hours. You may be able to use this “fast track” filing option to immediately stop creditors from harassing you, prevent your electric or other utilities from being shut off, keep your wages from being attached, or stop your home from being lost to foreclosure if you’ve fallen behind on your mortgage payments.

Of course, filing is only the first step to completing a bankruptcy. And you want to do it right because your bankruptcy filing will be reviewed for errors which could cause your case to be dismissed. So it’s important to find an attorney experienced with bankruptcy when you’re doing a rush filing to avoid costly mistakes. If all goes well, you may have your case successfully processed by the court and closed within 90 days after filing.

Can banks or credit card companies object to my bankruptcy?

About a month after you file a petition for personal bankruptcy in Rhode Island, you must go to the Federal Center in downtown Providence and meet with a bankruptcy trustee. The bankruptcy trustee is not a judge;  rather, she or he is appointed by the court to try to get back money from you for banks, credit card companies, and others you owe money to.

bankruptcy-ri-341-meeting-of-creditorsAt this meeting (called a 341 meeting of creditors), the trustee may ask you questions, trying to see if you lied, left out important information, or otherwise incorrectly filled out your bankruptcy petition and could really pay back more money. Sometimes, banks and other creditors will also come to this meeting and ask their own questions. It is important that you answer each question carefully and honestly to avoid being charged with perjury, which is a federal crime.

Fortunately, the trustees tend to ask similar questions each time. So it’s possible to prepare for this meeting with help from an experienced bankruptcy attorney.  And even if the trustee asks you a “curve ball” question, you’ll then have an experienced attorney sitting by your side to coach you through without any problems, as is usually the case.

Top-filing RI personal bankruptcy attorney

Top Filing Chapter 7 Bankruptcy RI Attorney, 3rd quarter 2012According to an independent, national database, Attorney Hathaway filed more Chapter 7 bankruptcy petitions than any other Rhode Island attorney from July through September 2012. We want to thank our clients for making this possible, particularly since satisfied clients are one of our best sources of new business. If you or someone you know is considering filing bankruptcy, please contact us  for more information free of charge.

Do medical bills go away in a RI Bankruptcy filing?

It’s been estimated that over 60% of bankruptcies are filed due to hospital visits, cancer treatments and other health expenditures. Fortunately, by filing for bankruptcy in Rhode Island, you can usually eliminate debt owed to:

  • hospitals & medical clinics
  • laboratories & medical imaging/radiography
  • doctors, physician assistants & nurses
  • dentists & orthodontists
  • physical therapists & chiropractors

So yes, typically any unsecured medical debt can be eliminated in a RI Chapter 7 Bankruptcy filing, regardless of whether it’s $10 or $1 million you owe. You’ll want to consult with a RI attorney experienced with bankruptcy to guide you through the process, especially if you’ll need to keep receiving health care services following your bankruptcy filing for a chronic medical condition.

How much does it cost to file bankruptcy in RI?

Recently I met a young woman – a recent immigrant to this country – who had met with another attorney before meeting with me. Her case was relatively simple, so I was surprised to learn her first attorney had proposed a fee of $5,000. When I told her my flat fee, she was absolutely shocked.

bankruptcy RII’m unaware of any Rhode Island attorney who charges less than me to file a personal bankruptcy. The typical going attorney rate is probably $1,200 to $1,500 (not counting the $306 filing fee going to the court). I personally think that an attorney’s fee of $1,200 is reasonable and fair – given the amount of work that is involved in handling a Chapter 7 bankruptcy filing correctly. And for particularly complex cases, fees of $1,500 or higher may be appropriate. (Consumers beware: the RI Bankruptcy Court actually restricts attorneys from charging more than $1,500 for a Chapter 7 filing without prior court approval.) Also, some attorneys (including myself) offer discounts to seniors and others with extremely simple cases.

Does it cost more to file bankruptcy with my spouse?

Oftentimes not. In Rhode Island you can include your husband (or wife) in a bankruptcy filing at no extra charge from the court. The court filing fee is the same as if you were filing bankruptcy alone. And as for attorney fees, at my office we typically don’t charge additional fees for adding a spouse to a bankruptcy.

Even so, there are certain situations when it makes more sense for a couple to file bankruptcy separately. You’ll want to consult with an attorney experienced with bankruptcy to determine what would work best for both you and your partner.

Do income taxes get eliminated by filing for bankruptcy in Rhode Island?

If you owe federal or state income taxes from past years, you may be able to get rid of them by filing a RI bankruptcy. Generally speaking, you must wait three (3) years from the date the IRS / RI Division of Taxation processed your income tax return. (Note: this will likely be after the date you filed your tax return.) A Rhode Island attorney experienced with bankruptcy will be able to help you figure out when exactly you’re eligible to eliminate your past-due income taxes in a bankruptcy.

Can I file bankruptcy in Rhode Island if I lived in another state recently?

Recently lived in another state of New England than Rhode Island?Rhode Island’s bankruptcy laws are generous as to what belongings you’re allowed to keep (exempt) after filing bankruptcy. In fact, it’s rare for anyone to lose a house, car or anything else in a RI bankruptcy filing (assuming they’ve hired an experienced RI bankruptcy attorney).

Generally speaking, you can file bankruptcy in Rhode Island if you’ve live here for the last 6 months. So for example if you’ve lived in Warwick, RI for the last 180 days, you can file in the District of Rhode Island.

There is a catch, however, if you’ve recently moved here from out-of-state. Even if you’ve lived here for over 180 days, you may still be under your old state’s laws in terms of what things you’re allowed to keep after the bankruptcy.

Bottom line: the longer you’ve lived here, the better. You’ll want to consult with a Rhode Island attorney experienced with bankruptcy to ensure you’re eligible to keep your house, car, and other belongings through a RI bankruptcy.

How can I make sure all my debts get eliminated when I file for bankruptcy?

If you're going to all the trouble of filing for bankruptcy, make sure you do it right!

Bankruptcy laws are more complex than ever, and a messed-up filing is a headache!

When you file bankruptcy in Rhode Island, you should list everyone you owe money to. If you fail to list a creditor, you risk not getting off the hook for that particular debt.  How can you avoid leaving a creditor out of your bankruptcy filing? Typically a credit report will identify most of your creditors. (Once every 12 months you can order a free credit report through annualcreditreport.com, or by calling 877-322-8228.)

However, not all debts will appear on your credit report. Medical bills, utility bills, and cell phone bills are often missing from credit reports, as are outstanding gym membership fees, unpaid magazine subscriptions, etc. In addition, debts that have been unpaid for more than seven years may stop showing up on a credit report. But if you don’t list them they might come back to haunt you after your bankruptcy (for the original amount plus a lot of interest accrued in the hands of some local collection agency– after the original creditor “charged off” the debt).

If you do accidentally fail to list a creditor when filing for Chapter 7 bankruptcy, it’s often possible to go back and amend (fix) your bankruptcy papers to include the missing creditor within 90 days after you file, though a $26 court fee will apply. Beyond 90 days, a heftier court fee ($260) will apply, and there are some situations where adding a missing creditor may not even be allowed. Chapter 13 (payment-plan type) bankruptcies can be even more risky to have to add a missing creditor.