Bankruptcy may be necessary, if a person cannot make the minimum payments on financial obligations. Chapter 7 bankruptcy is used to wipe the financial slate clear of unsecured debts. Chapter 13 is the option necessary in order to retain assets and restructure the payments to an affordable amount. Bankruptcy should be used as a last resort, if an individual is struggling to pay the minimum balances on credit cards, the house payment, utilities, and have barely enough left over for basic groceries.
Hawaii Bankruptcy Topics
- Personal Bankruptcy Options
- Keep Your Home: Bankruptcy and Foreclosure
- Hawaii Exemptions to Bankruptcy Liquidation
- Options for Filing Bankruptcy
- Local Bankruptcy Courts and Trustees
In Hawaii, consumers have the options of filing Chapter 7 or Chapter 13 bankruptcy, under U.S. Bankruptcy Code Title 11.
- Chapter 7 Bankruptcy - Debtors who want a fresh start and be free of unsecured debts should file for chapter 7 bankruptcy. To avoid abuse of the law, a means test will be used to determine if the debtor really does not have the means to pay his/her bills. The trustee can seize all applicable assets to sell as partial repayment of financial obligations. However, some obligations cannot be wiped out by bankruptcy. In Hawaii, the median income for single wage earners is $52,784, two people are $66,227, and for a family of three it is $73,187.
- Chapter 13 Bankruptcy - For wage earners that simply need help to get their payments under control, so they do not lose their assets, Chapter 13 bankruptcy is an option. Creditors might be asked to forgive interest and fees. Then, the court determines whether the debtors have the means to pay the minimum amount acceptable. The amount owed is calculated to be paid within the next 3-5 years, and a payment schedule is established. Payments are made to the trustee, who will then distribute the money among creditors. In Hawaii, the debtor must have no more than $1,010,650 in secured debt, and $336,900 in unsecure debt, in order to qualify for chapter 13. (See more on Filing Chapter 13 in Hawaii).
When a debtor files for bankruptcy protection, all attempts to collect payments are halted. While bankruptcy may not be able to save a home, it can stall the inevitable. A homeowner may have the opportunity to file Chapter 13 bankruptcy, in an effort to catch up bills and keep the house. However, if the foreclosure process has already begun, the lien holder may petition the court to have the house released, so it can be put up for sale. The best chance of saving a home is to file before foreclosure has been initiated.
As in every other state, Hawaii has a list of assets that cannot be touched by bankruptcy proceedings. Among the specific list of assets are:
Type of Asset(s)
Details on Applicable Exemption(s)
Head of household or person 65 and over $30,000. All other can claim $20,000. Property is one acre or less. Proceeds are exempt for 6 months. Property may be exempt, if only one spouse is filing.
Disability benefits, annuity of endowment, policy proceeds if the beneficiary is a child, spouse, or parent, life insurance for spouse of child, group insurance, and life insurance that is specifically not to be used to pay off debts
Property that is related to a business partnership
Firefighters, police officers, and public officials, ERISA
Needed furnishings and appliances, books, clothing, and jewellery up to $1000, burial plot, housing down payments for the project for home in state, vehicle worth no more than $2,575, $60 of work relief funds
Tools of Trade
What you may need to seek employment
Unemployment compensation, workers compensation, and any assistance paid by the Department of Health Services.
- Use a Bankruptcy Lawyer - Legal advice is strongly recommended, when filing for bankruptcy. A meeting will be held between creditors and the debtor. A bankruptcy lawyer can look out for the interests of the client, and make sure all of the difficult issues are addressed in full. In court, legal questions can be answered appropriately, without confusion. He/she can provide moral support and know what assets are protected by the law.
- Use a Filing Service - Some people decide to save money and opt to use a filing service. However, this action is not recommended, because the service is only responsible for filling out the appropriate paperwork. Even if they do not forget an important document, the service cannot answer any legal questions or represent the debtor in court. The creditor faces the court alone.
- File “Pro Se” - In order to save the legal fees, an individual might not opt to have any other representation in court. The creditor stands before the court to present the case. Unfortunately, this action is foolhardy, in most cases. With all the particular nuances of the case, and the legal terms being discussed, the debtor will be better off borrowing the money to pay a lawyer.
Hawaii District Court
C338 Prince Kuhio Federal Bldg
300 Ala Moana Boulevard
Honolulu, HI 96850-0001