Updated January 21, 2019
When your income doesn’t cover your bills, filing a bankruptcy case might help you take control of your financial life and give you a fresh start. But finding the information you need to get your Hawaii bankruptcy case started can be difficult. The basics are here, including information about:
- property you can exempt (protect)
- income-qualifying (means testing) data
- credit counseling providers
- official bankruptcy forms, and
- your local Hawaii bankruptcy court.
Qualifying for Bankruptcy in Hawaii—Means Testing
The first step is learning about the two primary types of bankruptcy available to most individuals and deciding which will be best for you. Then you’ll determine whether you meet the chapter’s qualification requirements.
- Chapter 7 bankruptcy. You’ll meet income qualifications by passing the “means test.” If your family income is lower than the median income of your state, you pass and can receive a discharge in a Chapter 7 case. You might still pass the means test after subtracting certain standard expenses.
- Chapter 13 bankruptcy. If your income exceeds the Chapter 7 limits, you can repay some or all of what you owe in a five year Chapter 13 repayment plan. The tricky part here is that you must have enough income to pay all required debts. To determine your Chapter 13 bankruptcy payment, you’ll do a calculation similar to that in Chapter 7. You’ll pay the greater of your disposable income, the value of your nonexempt property, or the amount of your nondischargeable debt (such as support obligations and tax debt).
If you aren’t sure which chapter will be best, try starting with What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy? The necessary income charts and expense guidelines are on the U.S. Trustee’s website (select “Means Testing Information”).
Protecting Property With Hawaii’s Bankruptcy Exemptions
An important part of deciding the best chapter for you is determining whether you’ll lose property. Rest assureded that you won’t lose everything. In fact, you might not lose anything at all.
Finding out which assets you can protect is as simple as looking at the two separate exemption schemes allowed in Hawaii and deciding which list best meets your needs—the list of federal bankruptcy exemptions or Hawaii’s exemptions (more below). If you go with Hawaii’s exemption list, you can use federal nonbankruptcy exemptions, too.
What will happen to nonexempt property—property you can’t protect with an exemption—will depend on the chapter you file.
- In a Chapter 7 bankruptcy, the trustee appointed to manage your matter will sell any property that isn’t exempt for the benefit of your creditors.
- By contrast, you can keep all of your property in a Chapter 13 bankruptcy. But, there’s a catch. You must pay the nonexempt property value to your creditors through the three- to five-year Chapter 13 repayment plan.
- Spouses who file a joint bankruptcy in Hawaii can double the exemption amount in each category (except for the homestead) as long as both spouses have an ownership interest in the asset.
Hawaii’s Bankruptcy Exemption List
Here are some of commonly used Hawaii bankruptcy exemptions. Unless indicated, all references are to the Hawaii Revised Statutes.
Hawaii Homestead Exemption
If you’re the head of the family or over 65, you can exempt up to $30,000 of equity in no more than one acre of real property located in Hawaii. Head of the family is defined as meeting the IRS standard for the head of household, or residing in the real property and caring for a direct relative (for example, a child, parent, sibling, or grandchild). If you’re not the head of the family, you may protect up to $20,000 of equity in your home.
Sale proceeds are exempt for six months after the sale. Spouses can’t double the Hawaii homestead exemption. Property held by the entirety in Hawaii is exempt against claims of creditors of only one spouse or reciprocal beneficiary. (Haw. Rev. Stat. § 651-91, 92, 96).
Hawaii Motor Vehicle Exemption
You can protect up to $2,575 of equity in one motor vehicle. (Haw. Rev. Stat. § 651-121).
Other Bankruptcy Exemptions in Hawaii
Here are additional types of property you’ll be able to protect.
- Personal property. Household furnishings, appliances, books, and clothing used by you and your family; jewelry and watches up to a total of $1,000 in value (Haw. Rev. Stat. § 651-121 (1)); burial plot, up to 250 square feet, and all improvements and gravestones upon it (Haw. Rev. Stat. § 651-121); insurance proceeds or proceeds from the sale of personal property (up to six months after the sale) (Haw. Rev. Stat. § 651-121); income earned during the 31 days before filing bankruptcy (Haw. Rev. Stat. § 651-121).
- Pensions and retirement accounts. IRAs and ERISA-qualified retirement accounts (Haw. Rev. Stat. § 651-124); firefighters’ pensions (Haw. Rev. Stat. § 88-169); police officers’ pensions (Haw. Rev. Stat. § 88-169); public officers’ & employees' pensions (Haw. Rev. Stat. §§ 88-91 and 653-3).
- Tools of the trade. Tools, instruments, uniforms, books, equipment, one commercial fishing boat and nets, one motor vehicle, and any other personal property ordinarily and reasonably necessary to your business, trade, or profession. (Haw. Rev. Stat. § 651-121)
- Insurance. Accident, health, or sickness benefits (Haw. Rev. Stat. § 431:10-231); annuity contract or endowment policy proceeds wherein the beneficiary is the insured's spouse, child, or parent (Haw. Rev. Stat. § 431:10-232 (b)); group life insurance proceeds (Haw. Rev. Stat. § 431:10-233); life insurance proceeds if text of the policy prohibits proceeds from being used to pay the beneficiary's creditors (Haw. Rev. Stat. § 431:10D-112); life or health insurance policy for spouse or child (Haw. Rev. Stat. § 431:10-234).
Find out more about retirement accounts in Your Retirement Plan in Bankruptcy.
More Bankruptcy Information
The information that follows usually isn’t needed unless you’re ready to prepare your paperwork and file your case.
Hawaii Credit Counseling and Debtor Education Information
Individual filers must take two financial courses—one before filing and another before receiving a discharge (debt forgiveness). Approved providers are listed under “Credit Counseling & Debtor Education” on the U.S. Trustee’s website (be sure to scroll down to your district).
Hawaii’s Bankruptcy Court Website and Location
On the Hawaii Bankruptcy Court website, you’ll find the court’s local rules and instructions for filing your paperwork (click on “Resources” in the left-hand column).
Hawaii has only one bankruptcy court location:
United States Bankruptcy Court
District of Hawaii
1132 Bishop Street, Suite 250
Honolulu, HI 96813
Bankruptcy Costs, Filing Fees, and Forms
Most people must pay something to file for bankruptcy, but it’s usually worth the cost. Here’s what you can expect.
- Official bankruptcy forms. Before the Hawaii bankruptcy court wipes out qualifying debt, you must disclose all aspects of your financial situation—income, expenses, property, debt, and property transactions—on official bankruptcy forms. These forms are free. After filling out the bankruptcy forms online on the U.S. Bankruptcy Court forms webpage, you’ll file your paperwork in your local bankruptcy court (more below) along with a filing fee or fee waiver.
- Bankruptcy filing fees or fee waiver. You’ll pay a filing fee when you file your paperwork with the court unless you qualify for a fee waiver. Find out about both in Bankruptcy Filing Fees and Costs.
- Bankruptcy lawyer fees. The cost to hire a lawyer varies depending on the area. Many people benefit from retaining counsel. Find out the benefits of being represented by an attorney.
This overview cannot provide all of the information you’ll need to file a bankruptcy case. For more detailed information, consider consulting with a local bankruptcy lawyer or buying a self-help book such as How to File Chapter 7 Bankruptcy by Attorney Cara O’Neill and Albin Renauer J.D.