If you’re struggling with overwhelming debt and facing the possibility of bankruptcy, it’s important to understand your options and how the process works. In this blog, we’ll cover the types of bankruptcy, the consequences of filing for bankruptcy, and how to avoid it in Rhode Island. We’ll also provide some helpful government links for further information.
Types of Bankruptcy
There are two main types of bankruptcy for individuals: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is also known as “liquidation” bankruptcy. This type of bankruptcy involves selling off all non-exempt assets to pay off creditors, and any remaining eligible debts are discharged. Eligible debts may include credit card debt, medical bills, and personal loans. However, not all debts can be discharged through Chapter 7, such as student loans, tax debts, and child support payments.
Chapter 13 bankruptcy is also known as “reorganization” bankruptcy. This type of bankruptcy involves creating a repayment plan to pay off creditors over a period of three to five years. This allows the debtor to keep their assets and pay back their debts at a more manageable rate. This type of bankruptcy is generally more appropriate for those with a steady income and significant assets they want to protect.
Consequences of Bankruptcy
Bankruptcy has serious consequences that can impact your credit score and financial future. A bankruptcy filing stays on your credit report for up to ten years and can make it more difficult to obtain credit or loans in the future. It can also impact your ability to get a job or rent an apartment. Additionally, bankruptcy may not discharge all of your debts, and you may still be responsible for paying certain debts even after filing for bankruptcy.
How to Avoid Bankruptcy in Rhode Island
If you’re struggling with debt, there are several steps you can take to avoid bankruptcy:
- Create a budget and prioritize your spending to pay off your debts.
- Contact your creditors and negotiate a payment plan or debt settlement.
- Seek credit counseling or financial coaching to learn how to manage your money better and get out of debt.
- Consider debt consolidation or refinancing options to lower your interest rates and make your debts more manageable.
- Sell assets you no longer need or use to pay off your debts.
Helpful Government Links
If you’re considering bankruptcy or need assistance with managing your debt, there are several government resources available in Rhode Island:
- The Rhode Island Bar Association offers a lawyer referral service that can connect you with a qualified bankruptcy attorney.
- The Rhode Island Department of Business Regulation offers consumer protection resources, including information on debt collection and credit reporting.
- The Rhode Island Housing Assistance Center provides foreclosure prevention resources and assistance to homeowners struggling with mortgage payments.
- The Rhode Island Community Action Association offers financial counseling and debt management services to low-income individuals and families.
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