How Rhode Island Laws Protect Your Assets and Rights

This guide provides an overview of Rhode Island’s legal framework, covering debt management, bankruptcy, business entity formation and estate planning. All information is accurate as of September 2024 and applies to state laws, with references to applicable federal regulations where necessary.

Debt Consolidation & Settlement

The options available to the indebted Rhode Islander include debt consolidation and debt settlement.

• Debt Consolidation: It is the process of compiling all debts into a single loan, preferably with reduced interest and less burdensome installments. Rhode Island law doesn't impose specific requirements on consolidation companies but consumers should choose a licensed one to avoid fraud.
• Debt Settlement: It is a process where the consumer and creditor agree on a reduction of the total amount owed. Under the fair practice regulation, debt settlement companies operating in Rhode Island are regulated by numerous federal and state laws.

In this, the Rhode Island General Assembly enacts certain specific laws that protect against fee overcharging or misrepresentations by any debt relief company.

Statute of Limitation on Debt

Rhode Island sets certain statutes of limitation as to when various types of debt are to be collected under the law. These dates are very important to identify, both on the part of the creditor and the debtor.

• Written Contracts: The statute of limitations for written contract-based debts is 10 years. It starts running from the date of the last payment or default, whichever occurred later, according to Rhode Island General Laws § 9-1-13.
• Oral Contracts: Rhode Island has the same 10-year limitation for oral contracts, which is definitely longer than in most states.
• Judgments: Rhode Island creditors have a very generous 20-year timeframe to collect on a court judgment. These judgments can even be renewed before they expire and may extend the collection time.

Rhode Island Debt Collection Laws

Rhode Island has imposed some strong consumer protection measures regarding debt collection.

The Rhode Island Fair Debt Collection Practices Act closely resembles the FDCPA, which, for a long time, has prohibited abusive, deceptive and unfair debt collection. This state law protects Rhode Island consumers at another level.

Exemptions to Wage Garnishment: Rhode Island law exempts a portion of a debtor's wages against garnishment. The intent behind this is to guarantee debtors some semblance of income, however paltry, during the process of debt collection.

These statutes put together to balance the rights of creditors with consumer protection during the collection of debts in Rhode Island.

Bankruptcy in Rhode Island

Bankruptcy in Rhode Island is a federal law that offers reorganization or discharge options from unbearable debt for individuals and business entities. In the state, Rhode Island residents file their bankruptcy cases with the U.S. Bankruptcy Court for the District of Rhode Island. The most common forms of bankruptcy include :

• Chapter 7 Bankruptcy: It is otherwise called liquidation bankruptcy. It is exclusively meant for very low-income individuals or businesses that have scanty assets. Nonexempted assets are sold in a Chapter 7 proceeding to pay back creditors, while the rest of the debts eligible might get discharged.
• Chapter 13 Bankruptcy: This is usually referred to as reorganization, a kind of bankruptcy available to individuals with regular income. It enables debtors to make a repayment plan, usually lasting for 3-5 years, often letting them retain their property while restructuring their debts.
• Chapter 11 Bankruptcy: While mainly applied to businesses, Chapter 11 allows debtors to restructure their debts while still operating. Very few individuals have used this chapter for reasons of high debts.

Rhode Island Bankruptcy Exemptions

Rhode Island filers can choose between federal and state exemptions when declaring bankruptcy to keep certain properties. The state's main exemptions, exclusively, are as follows:

• Homestead Exemption: Rhode Island law exempts from creditors up to $500,000 of equity in a primary residence, pursuant to R.I. Gen. Laws § 9-26-4.1.
• Personal Property Exemptions: The state provides a number of personal property, retirement account, and vehicle exemptions up to stated limits.

Thus, the exemptions are important in defining what property a debtor shall retain upon the declaration of bankruptcy.

Rhode Island Business Incorporation

Incorporating a business in Rhode Island requires compliance with state-specific regulations. Below is an outline of the general process for forming a business entity in the state:

Business Incorporation Process

1. Business Name: Find a unique business name that meets the naming requirements set by the Rhode Island Secretary of State. The chosen business name must not be identical or substantially similar to another business that is currently registered.
2. Registered Agent: A registered agent shall be assigned to Rhode Island and will represent the company and accept all legal documents on its behalf.
3. Articles of Incorporation/Organization: These include filing the articles of incorporation or formation with the Secretary of State appropriately. These are legal documents containing the name of the company, its purposes and the ownership structure.
4. Internal Governance: Draft corporate bylaws (for corporations) or an operating agreement (for LLCs) that outline the company's operational procedures and management.
5. Annual Filing: Every Rhode Island corporation and LLC has to file an annual report that reflects the changes in ownership, address or other business information with the Secretary of State.

Business Licensing

Whereas Rhode Island doesn't require a general business license for most entities, depending on the type of business, some special licenses or permits might be required in the following industries:

1. Licenses for businesses: In professions such as law, medicine and real estate, take professional licenses.
2. Local Licenses: Many of its cities and counties require local permits or licenses to operate under Rhode Island, especially restaurants, retail stores and places that sell liquor.

Rhode Island Wills and Estate Planning

Estate planning in Rhode Island helps an individual organize his assets and distribute them upon one's death. Rhode Island's law provides a number of estate planning tools available, including wills and trusts.

Wills in Rhode Island

• Requirements of a Valid Will: All Rhode Island wills must be written by the testator and signed, and at least two witnesses must be present. R.I. Gen. Laws § 33-5-5. Oral - what is referred to as nuncupative - wills are not accepted.
• Holographic Wills: Rhode Island does not admit holographic wills (those completely handwritten and unwitnessed) unless they conform to all the formalities.

Trusts in Rhode Island

Trusts are a very popular estate planning tool; they offer more flexibility than a single will, either during life or after death. Trusts avoid probate and ensure that property distribution remains private.

• Revocable trust: A living revocable trust refers to a trust that, during any specific time, the grantor might amend or revoke during his lifetime. It ensures that the transfer of assets will be carried out without probate.
• Irrevocable Trust: This trust cannot be modified once created but offers stronger asset protection and potential tax advantages.

Probate in Rhode Island

Probate is the court procedure through which the assets of a person are distributed following his or her death. A person dying with a will must file that will in the probate court of the county where the deceased had resided.

• Small Estates: Under Rhode Island, the simplified process of probate is conducted for small estates whose value is below $15,000 for quicker distribution of assets.
• Executor and Administrator: The executor named in the will is responsible for handling estate property, satisfying debts and obligations, and distributing the properties among the people named in the will.

Additional Legal Resources in Rhode Island

• Rhode Island Bar Association
• Rhode Island Judiciary
• Rhode Island Department of Business Regulation

Conclusion

Rhode Island has a broad scope of laws that deal with managing debt, bankruptcy, the formation of businesses and even estate planning. Individuals find protection for their rights as consumers, just like businesses find opportunities within state law. As always, where legal issues are concerned, an individual should consult with an attorney licensed to practice in Rhode Island since laws can constantly change and fact patterns can affect specific legal consequences.