In this economy, it's easy to become overwhelmed by debts and fall behind with payments. That's why federal law gives people the right to file for bankruptcy, so they can fix their finances and move on to a secure, debt-free life. There are a number of bankruptcy options, but two are more popular with consumers. Chapter 7 lets people erase most debts and start over after trustees sell their property to pay off their creditors. Chapter 13 gives those in debt a chance reorganize and create plans to make manageable payments over a number of years. If you live in Hawaii, you should be aware of how the state's specific laws can impact you.
Where to File
Hawaii's only bankruptcy court is in downtown Honolulu, on Bishop Street between Beretania and Hotel Streets.
Eligibility for Chapter 7
Hawaiians can file for Chapter 7 liquidation bankruptcy if their incomes are less than the state median of $52,712 for a single wage-earner. The limit increases for each additional family member, up to $85,337 for families of four and even higher for larger families. Those who earn more than the median still might be able to file for Chapter 7 if they pass a stringent means test.
Chapter 13 Repayment Plans
Income also determines how long filers have to repay their debts under Chapter 13 bankruptcy plans. If your income is less than the state median, you generally have 36 months. The court may allow longer if the judge believes there's a good reason. If your income is more than the state median, your repayment plan can be up to 60 months.
How Much Property Can I Keep?
Bankruptcy law allows exemptions - dollar amounts of property you're allowed to keep when you file. Common exemptions include equity in:
- Retirement accounts
- Household items.
In Hawaii, you can choose between the state's exemptions or the federal list. You can't choose from each, however. You must elect to use one list or the other, and the difference between the two can be significant. For example, Hawaii allows a $30,000 homestead exemption for your residence, while the federal exemption is only $21,625. The federal vehicle exemption is $3,450, while Hawaii's is $2,575. Hawaiian spouses who file for bankruptcy together are allowed to double these exemptions.
To use Hawaii's exemptions, you must have lived in the state for two years. A Hawaii bankruptcy attorney can help you figure out if you can use Hawaii's exemptions or if you must use the federal list.