Rhode Island Debt Relief - A Pro Guide to Financial Freedom

Dealing with debt can be overwhelming for anyone, especially in Rhode Island, where the high cost of living and employment issues make life difficult. It is pretty complicated and stressful for anyone to handle the expensive medical, housing, education costs and other related expenses while paying off high-interest credit card bills, monthly mortgage payments, or student loan payments.

But residents of Rhode Island can balance their debts and income with several effective debt relief options. They can choose a suitable debt relief method to manage their finances, based on their income and other financial circumstances. But to get back on track properly, they should consult a professional before signing up for any option.

Debt Relief Options in Rhode Island

The following table will explain the best debt relief options available in Rhode Island:

Option Best for What it does Typical timeline Credit impact Costs/risks
DIY snowball/avalanche People with a steady income You focus on a specific type of debt and pay aggressively Months–years Improves as balances drop Minimal fees; need to be regular on payments
Nonprofit credit counseling & DMP High interest on many cards, still current or just behind Single payment monthly plan, reduces interest rates, ; works on most unsecured debts 3–5 years Small dip, then improves with on-time payments Monthly fee; not all creditors can join; must close cards. Use only approved/reputable agencies.
Debt consolidation loan Good/excellent credit and stable income Replaces multiple cards with one fixed loan 2–7 years Neutral/slight dip upfront; improves if paid on time Watch for origination fees, variable rates, or adding collateral
Debt settlement Hardship, already delinquent, can save lump sums Negotiate to pay less than the full balance 6–36+ months Significant negative during the process; may get lawsuits No upfront fees allowed for most for-profit settlements via the FTC Telemarketing Sales Rule; forgiven amounts may be taxable (Form 1099-C).
Bankruptcy (Ch. 7 / Ch. 13) Overwhelming debt or active lawsuits/garnishments Ch. 7 can wipe qualifying unsecured debt; Ch. 13 reorganizes into a 3–5 yr plan ~4–6 months (Ch. 7) or 3–5 yrs (Ch. 13) Major hit, but you can rebuild Court/attorney fees; you must complete counseling/debtor education with approved providers.

Important note: If any company is offering a debt management program in Rhode Island or a debt settlement option to you, you must make sure that the company is following all the state laws regarding it. The RI Attorney General has recently sued unlicensed or overcharging providers.

Bankruptcy Exemptions In Rhode Island

In Rhode Island, you, as an individual, can select either the state exemptions or the federal exemptions. That’s why Rhode Island is popular as the "debtor's choice" state

1. Homestead Exemption

The homestead exemption amount is $500,000. The homestead exemption in Rhode Island does not protect your home from sales for taxes, sewer/water liens, fire district assessments, debts before you got your home, or you incur while buying the house, any child support orders against you, or medical assistance liens.

3. ​Personal Property Exemptions

Apart from homestead exemptions, you might be eligible for these personal property exemptions, also as per the Rhode Island laws:

Asset Category Exemption Amount Details
Motor Vehicles $12,000 total All motor vehicles owned by you must not exceed this amount in total.
Household Goods $9,600 total Furniture, clothing, beds, bedding, and household items; your spouse cannot double this exemption if filed jointly.
Jewelry $2,000 total Your total jewelry value combined
Working Tools $2,000 total Tools required for your job; also includes a professional library.
Books $300 total Bibles, school books, and other books that you have and use in your family.
Necessary Clothing Unlimited Necessary clothes for you and your family members.
Savings Deposits $500 total Banking or financial institution deposits.
Wildcard (Additional - Bankruptcy Only) $6,500 You must file for bankruptcy to be eligible for any of your assets.

Retirement and Pension Protections

In Rhode Island, you have the Internal Revenue Code §§ 408 and 408A, and the Employee Retirement Income Security Act of 1974 (ERISA), which protects your retirement accounts such as IRAs, Individual retirement annuities, 401(k)s, 403(b)s, profit-sharing plans, and your defined benefit plans. You may get an additional $1,711,975 exemption as a bankruptcy filer on your IRAs and Roth IRAs (as of April 1, 2025).

​Wages and Earned Income

Debt Relief Rhode Island law protects earned income in specific circumstances:

If you work as a sailor or receive wages from a charitable organization, it can not be garnished. Apart from that, wages you receive from minor children or your spouse are also fully protected from bankruptcy.

Your other earned wages may also be protected up to $50. If you serve as an active duty military personnel, you’ll receive special protections on your wages.

Important Limitations

  • Exemptions apply only to your equity in property
  • Prepaid tuition programs and tuition savings programs are exempt from protection. But the protection can be dissolved if you receive court orders for divorce or child support.

How does debt collection work in Rhode Island?

Any debt collection agency doing business in RI must be registered and follow the Rhode Island Fair Debt Collection Practices Act (RIFDCPA).

If you get a lawsuit, your first duty is to answer that within 20 days in the District or Superior Court. If you do not answer, you’ll get a default judgment.

How Much Creditors Can Garnish Your Wages in Rhode Island?

As per the Rhode Island wage garnishment limits, the amount will be the lesser of the following:

  • 25% of disposable income (excluding medical debt)
  • Disposable income above 30× of the federal minimum wage (it is now $7.25).

What is the statute of limitations on debts in Rhode Island?

Based on different types of debt, the following statute of limitations for debt in Rhode Island is:

Debt Type Statute of Limitations
Credit Card Debt 10 years
Medical Debt 10 years
Student Loan Debt 10 years
Auto Loan Debt 10 years
Mortgage Debt 10 years
Personal Loan Debt 10 years
Judgment (court-ordered) 20 years
Written Contracts 10 years
Oral Contracts 10 years
Promissory Notes 10 years

What is the average debt in Rhode Island?

Household debts:

Debt Metric Amount Details
Average Total Debt Per Person $61,300 2024 data updated for 2025
Debt Change (Year-over-Year) -$212 Decrease in 2024 vs. 2023 (inflation-adjusted)
Rhode Island vs. U.S. National Average -$360 less Below the national average
National Ranking 20th lowest The average total debt among all the states

Based on the debt type:

Debt Category Average Amount Per Person Details
Mortgage Debt Per Homeowner $228,978 Only homeowners
Auto Loan Debt $15,739 7.9% of total debt
Credit Card Debt (Per Household) $11,121 increased $211 per household in Q1-Q2 2025
Credit Card Debt (Per Credit Consumer) $7,494 Active credit card consumers
Student Loan Debt $5.0 billion In total statewise
Student Loan Debt (Per Borrower) $33,400 Data from 149,700 student loan borrowers
Total Credit Card Debt (Statewide) $4.38 billion Combined household credit card debt

Debt Relief Rhode Island resources

Frequently asked questions

No, if you can stop the collection agency from calling you at your workplace or during office hours. Under the FDCPA, collectors are bound to comply with Rhode Island debt collection laws. You have to write a letter to the agency for that, send it by certified mail, and keep copies.

You have 10 years, as the Rhode Island general civil statute of limitations is 10 years. Do not take any sudden action regarding the debt, as it will affect the SOL clock.

First of all, answer the lawsuit within 20 days. Do not miss that, as it will lead to a default judgment.

Usually NO. Making on-time payments through a DMP helps improve your credit score. But closing your credit accounts (credit cards) may affect your score.

Any debt settlement company may operate legally in Rhode Island if it complies with the FTC rules and does not charge any upfront fees.

There are certain limits for that. If you have a house valued under $500,000, you’ll use Rhode Island’s homestead exemption, and your assets will be safe.

Yes—as per the new court rule (CFPB’s 2025 rule), your medical debt collection will not be shown in your credit report.

Sources:

Key Takeaways:

  • You have five main debt relief options.
  • You’ll get multiple exemptions for bankruptcy in Rhode Island, notably a $500,000 homestead exemption.
  • Answer faster, if you get a lawsuit, you have only 20 days for it.
  • Debt settlement companies can’t charge you upfront fees legally.
  • Your creditors can only garnish up to 25% of your disposable income.
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