One important decision you’ll need to make when filling out your bankruptcy petition involves choosing which exemption statutes you’ll apply to your property. Rhode Island bankruptcy law allows residents (who have lived in the state for a minimum of 2 years) to claim either state exemptions or federal exemptions. It’s possible that you can exempt the same amount of property under both schemes, depending on what you own. But it’s also possible that you’ll benefit significantly by choosing one approach over the other. As you aren’t allowed to “cherry pick” exemptions from both structures, it’s important to compare and contrast the exemption types (including the federal nonbankruptcy exemptions) and amounts allowed under both schemes. That way, you can make an informed decision regarding which will serve you best.
What are the Rhode Island bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy?
One of the reasons some Americans hesitate to file bankruptcy is that they’ve heard the myth that bankruptcy courts require filers to sell all of their personal property. While it’s true that unlike “reorganization” under Chapter 13 bankruptcy, Chapter 7 bankruptcy does allow for the sale of a filer’s nonexempt property, exemption statutes are structured so that filers rarely lose ownership of much property, if any at all. The bankruptcy trustee assigned to a Chapter 7 case is not allowed to sell any of the filer’s exempt property. By claiming as manybankruptcy exemptions as you can, you should be able to achieve a fresh start without losing ownership of much (if any) of your property. By treating Rhode Island’s bankruptcy exemptions with care, you’ll place yourself in good shape to eliminate your debt without losing your assets.↑ Back to top
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Does Rhode Island allow the use of federal bankruptcy exemptions?
One important decision you’ll need to make when filling out your bankruptcy petition involves choosing which exemption statutes you’ll apply to your property. Rhode Island bankruptcy law allows residents (who have lived in the state for a minimum of 2 years) to claim either state exemptions or federal exemptions. It’s possible that you can exempt the same amount of property under both schemes, depending on what you own. But it’s also possible that you’ll benefit significantly by choosing one approach over the other. As you aren’t allowed to “cherry pick” exemptions from both structures, it’s important to compare and contrast the exemption types (including the federal nonbankruptcy exemptions) and amounts allowed under both schemes. That way, you can make an informed decision regarding which will serve you best.↑ Back to top
Rhode Island Bankruptcy Exemptions
When evaluating the exemption figures listed below, note that if you are married and filing for bankruptcy jointly with your spouse, you’re entitled to “double” nearly all of the exemption limits listed under Rhode Island law. Married couples are, with the notable exception of the homestead exemption, entitled to 2 full “sets” of exemptions. Therefore, unless otherwise noted, if you jointly own the property you’re exempting, you may double its value. Individuals filing as “single” may only claim up to the values listed below.
Real Property - the Rhode Island Homestead Exemption
If you are a homeowner, chances are that you’ll be better served by claiming Rhode Island exemptions, as opposed to federal exemptions. While the federal homestead exemption is capped at just over $25,000 in equity value for a single filer, Rhode Island allows residents to exempt up to $500,000 of equity in their principal residence. The only significant condition attached to this generous exemption is that you must be living on the property or intend to live on the property when you claim the exemption. In this context, equity means the financial investment you’ve made in your property. For example, if the bank loaned you $600,000 to purchase your home and you’ve paid $200,000 of your mortgage so far, you’ve accrued $200,000 in equity; all of which may be exempted under the Rhode Island exemption statutes.
Personal Property Exemptions
Unless otherwise noted, filers may claim the full value of the personal property exemptions listed below. If you own personal property that isn’t listed here, you may be able to safeguard it using the “wildcard exemption” explained in detail later in this guide. Note that most of the values listed below are calculated using “yard sale pricing,” so they’ll stretch to accommodate a great deal of property:
Bibles and books (up to $300)
Household furniture, goods, and supplies (up to $9,600 – note that married couples can’t double this particular exemption)
Jewelry (up to $2,000)
Library of a practicing professional
Motor vehicle (up to $12,000 in equity in a single vehicle)
Tools of the trade used for work (up to $2,000)
In addition to protecting real property and tangible property, exemptions can protect monetary assets, insurance coverage, and various benefits. Unless otherwise noted, the following monetary benefits may be exempted in full under Rhode Island law:
Accident or sickness insurance proceeds or benefits
Benefits for the blind, elderly, and disabled
Crime victims' compensation
Earned but unpaid wages for active military members and sailors
Earned by unpaid wages for non-military members and sailors (up to $50)
Earnings of minor children
Firefighter and police officers’ benefits
Fraternal benefit society benefits
Life insurance policy proceeds (if it explicitly states that it cannot be used to pay creditors)
Prepaid or savings educational tuition account
Private employee benefits
Property belonging to a business partnership
Retirement accounts as provided by federal law (11 U.S.C. § 522(b)(3)(C))
State and municipal employee benefits
State disability benefits
Tax-exempt retirement accounts
Temporary disability insurance
Veteran’s disability or survivor’s death benefits
Wages of a spouse or minor children (for up to one year after receiving public benefits or amounts paid by a charitable organization or fund providing low-income relief)
Other Rhode Island Exemptions
Rhode Island also offers a wildcard exemption of up to $6,500. Meaning, if you have property that you haven’t been able to exempt using the provisions noted above, you can exempt an additional $6,500 in value using this wildcard exemption. This provision may be used to safeguard real estate, personal property, and/or monetary assets.
As previously noted, if you’ve lived in Rhode Island for at least 2 years, you’re allowed to claim either Rhode Island bankruptcy exemptions or federal bankruptcy exemptions. Before you can determine which structure will be more financially advantageous, you’ll need to compare and contrast the benefits and drawbacks of each approach. Note that like state exemption laws, federal law allows married couples filing jointly to “double” their exemption amounts for jointly owned property, unless otherwise noted. Also keep in mind that federal exemptions are updated every three years, so the following figures will only remain current until April 1, 2022.
Federal bankruptcy law provides a homestead exemption of up to $25,150. If you don’t need to claim that total value for home equity or you’re not a homeowner, you can apply up to $12,575 of the homestead exemption to other property that isn’t exempted elsewhere. Additional exempt property values under the federal Bankruptcy Code include:
Alimony or spousal support (total value)
Child support (total value)
Crime victims’ compensation (total value)
Disability, illness, or unemployment insurance benefits (total value)
Health aids and other health equipment (total value)
IRAS and Roth IRAs (up to $1,362,800)
Jewelry (up to $1,700)
Life insurance policy (loan value up to $13,400)
Life insurance policy for a lost loved one you depended on, which you currently need for support (total value)
Lost earnings payments (total value)
Motor vehicle equity (up to $4,000)
Public assistance and other public benefits (total value)
Personal injury recovery (up to $25,150 – exceptions made for pain and suffering, as well as pecuniary loss)
Personal property: Animals, appliances, books, clothing, crops, furniture, household goods, and musical instruments (up to $625 per item, up to $13,400 overall)
Retirement accounts that are tax-exempt: 401(k)s, 403(b)s, defined benefit plans, money purchase plans, profit-sharing plans, SEP and SIMPLE IRAs (total value)
Social Security benefits (total value)
Tools of Trade: Books, implements, and tools of the trade (up to $2,525)
Veteran’s benefits (total value)
Unmatured life insurance policy except credit insurance (total value)
Unemployment compensation (total value)
Wildcard ($1,325 total plus unused homestead exemption value up to $12,575)
Wrongful death recovery for loss of an individual you depended on for financial reasons (total value)
Filing Chapter 7 Bankruptcy?
If you’re unsure of whether you should claim Rhode Island bankruptcy exemptions or federal bankruptcy exemptions, you can ask for guidance at no cost. Most bankruptcy law firms offer free consultations to prospective clients. These no cost meetings allow both Chapter 7 bankruptcy and Chapter 13 bankruptcy filers to receive legal advice with no obligation to utilize the firm’s services moving forward. If you’d like to work with a reputable bankruptcy attorney, Upsolve can help you locate one in Providence or anywhere else you may be located in Rhode Island. If you can’t afford the services of a bankruptcy lawyer beyond a free consultation, Upsolve may be able to help you file your bankruptcy case for free. No matter how you choose to approach your Rhode Island bankruptcy case, know that you can always access free guides concerning all aspects of the bankruptcy process on the Upsolve website.↑ Back to top