Last year, more than 1,200 residents of Hawaii filed for bankruptcy to relieve themselves of the constant stress and burden of financial debt. Of those, about a quarter of cases were filed under Chapter 13 bankruptcy laws, which helps to relieve debt and allows you to stop foreclosure, repossession and keep many of the assets you’ve worked so hard to earn.
At Abelmann Peterson, we prioritize the attorney-client relationship and work tirelessly to remove the stigma of bankruptcy to help people like you regain control of their financial health and future.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is an option offered under the bankruptcy system to relieve the stress and burden of both unsecured and secured debts that the person filing bankruptcy is unable to pay. Bankruptcy forms are filed, and the debtor proposes how much they’re able to pay towards their debts monthly. This is most effectively accomplished with the assistance of a qualified bankruptcy attorney.
There’s a lot to understand about Hawaii Chapter 13 bankruptcy, including state and federal law. We’re here to help break down the process for you and help you understand if Chapter 13 bankruptcy is the best solution for your financial situation.
Hawaii Bankruptcy Exemptions
According to bankruptcy laws, some assets are considered nonexempt property and may be exempt from your fresh start bankruptcy case. All circumstances and bankruptcy cases are different. So, you’ll want to discuss bankruptcy exemptions with your lawyer during your consultation.
Some assets qualify for a complete bankruptcy exemption, while others are exempt up to a specific value. Some qualifying exemptions may include:
- Personal property, up to a certain value
- Pensions and retirement accounts
- Tools of the trade
- Homestead exemption for your home, up to a specific value
- Unemployment compensation and public benefits
Do I qualify for Chapter 13 bankruptcy in Hawaii?
To qualify for Chapter 13 bankruptcy in Hawaii, you should be employed and pass a means test. This test considers state laws and the median income in Hawaii. If your income falls below the mean income for a family/household of the same size, your Hawaii bankruptcy attorney will guide you toward Chapter 7 bankruptcy instead.
If your income is above the median line, you will likely qualify for filing bankruptcy under Chapter 13 laws.
Credit Counseling
When people file for Chapter 13 in Hawaii, they are required to attend a credit counseling course and submit a certificate of completion within 14 days of filing their bankruptcy petition.
The credit counseling process is important. Its completion shows the courts and your creditors that you’re serious about getting your financial health back on track, and it provides a great deal of valuable information about debt management. Your bankruptcy lawyer can help guide you to an appropriate debtor education course.
Chapter 13 Trustee
After you file Chapter 13 bankruptcy, a Bankruptcy Trustee is appointed to your bankruptcy case. They are a United States Trustee responsible for collecting your monthly payment and distributing the funds to your creditors.
The Trustee serves a vital role in the Chapter 13 bankruptcy process. They are there to ensure integrity, prevent bankruptcy fraud, and serve as the mediator between you and your creditors.
Chapter 13 Payments
Under Chapter 13 bankruptcy, you solve your debt through a repayment plan that is calculated based on several factors. The bankruptcy courts first look at the money you have coming in, including your average monthly income and how much disposable income you have once all your financial obligations are met. Your average monthly income will also be used to determine if you qualify for a three or five-year repayment plan.
Certain debts are to be paid in full, while the amount you pay on others may be reduced. One type of debt that must be paid in full is what we call priority unsecured debts. These include debts such as back child support, alimony, tax debts, and any money you may personally owe to employees.
Defaulted mortgage payments and missed autopayments must also be repaid to retain your personal property.
There’s another category of debt that’s factored into your monthly payment called unsecured debt. Unsecured debts are debts that don’t have any collateral attached to them. This may include debts such as medical bills, personal loans, and credit cards. With Chapter 13 bankruptcy, most unsecured debts may be significantly reduced and factored into a monthly payment based on the debtor’s disposable income and living expenses.
Unemployment and Chapter 13 Bankruptcy
Current unemployment rates in Hawaii are a little over 4%, but this number can fluctuate sharply based on several factors, including the economy and the job market. What happens if you’ve filed for Chapter 13 bankruptcy and at some point find yourself unemployed?
To file Chapter 13, the debtor needs to pass a means test. This shows whether or not the debtor is financially capable of repaying certain debts. If you become unemployed and rely on unemployment compensation, you may no longer pass the medium income test.
The bankruptcy code is designed so that the court may reassess your Chapter 13 bankruptcy case and order a hardship discharge if you’re no longer able to make your payments. Your case may also be transferred to Chapter 7 bankruptcy to legally handle your remaining debts.
If you find yourself in this situation, consulting a Hawaii bankruptcy attorney can help you navigate the process and relieve the additional stress.
Chapter 7 vs. Chapter 13
Each person considering bankruptcy to help with their financial affairs comes to us with a different set of circumstances. Bankruptcy isn’t a one-size-fits-all solution, which is why we help our clients understand bankruptcy options and which solution is best for them. The two most common types of bankruptcy for personal debts are Chapter 7 and Chapter 13.
The difference between Chapter 7 and Chapter 13 is how existing debt is handled and the type of debt relief offered. Chapter 7 is essentially debt liquidation, meaning the person filing for bankruptcy is relieved from certain types of debt. Chapter 7 essentially wipes the slate clean.
Chapter 13 is what we call reorganization bankruptcy. It takes all of your eligible debts and reorganizes them into affordable monthly payments. When given a choice, why might you choose monthly plan payments vs. total debt discharge? All cases are different, but here are a few benefits to filing for Chapter 13.
- Maintain a positive relationship with creditors by repaying debt through affordable monthly payments
- Retain assets while resolving debt through a repayment plan
- Filing for Chapter 13 brings collection effort and legal action from creditors to a screeching halt
- You can get caught up on secured loans, including back mortgage payments and car loans, without losing your home or vehicle
- The amount of unsecured debt you have to repay may be reduced
- While Chapter 7 bankruptcy is discharged sooner by the bankruptcy court, Chapter 13 is removed from your credit report sooner
Costs of Filing Chapter 13 Bankruptcy
When you file for Chapter 13 bankruptcy in Hawaii, you’re required to pay a filing fee of $338 to the bankruptcy court. In addition to this, there are also bankruptcy attorneys and administrative costs that are to be considered.
When you’re already dealing with a lack of disposable income and feeling like you’re swimming in debt, the idea of paying hundreds of dollars to find relief can be a bit overwhelming. There’s the temptation to skip the bankruptcy lawyer and file bankruptcy without the guidance of a legal professional. You might also consider working with a dept management or debt relief agency in hopes of avoiding the bankruptcy process altogether.
These solutions may seem more economical, but in the long run, they can end up costing you more while not completely relieving the stress of debt or the endless collection attempts by creditors. It is always a smart idea to consult an experienced bankruptcy attorney to learn about options and have your questions answered.
Top Chapter 13 Bankruptcy Questions Answered
If you’re struggling with debt and the stress that comes along with it, then a fresh start through bankruptcy is a solution worth considering. It’s important to think of bankruptcy as a way of repairing your financial health and setting yourself up for a more successful future.
Priority unsecured debts cannot be discharged through Chapter 13. These include debts such as back child support or alimony payments.
Yes, Chapter 13 can stop foreclosure and repossession processes. Chapter 13 helps you get caught up on back payments and set up monthly payments that fit within your current financial means.
Some unsecured debts may be completely discharged during Chapter 13 bankruptcy, depending on several factors. Other types of debt, like secured debt, are repaid over a set number of years through monthly repayment.
If you work with an experienced bankruptcy attorney, you won’t have to appear in court. They will take care of those details for you.
At the end of your Chapter 13 bankruptcy, all debt that was included in the bankruptcy agreement is either paid or discharged. This does not include any new debt that was incurred during the terms of your bankruptcy agreement.
Chapter 13 bankruptcy stays on your report for a total of seven years. This is in contrast to Chapter 7, which will stay on your report for up to 10 years.
Keeping Assets in Chapter 13 Bankruptcy
With help from lawyers Rick Abelmann and Lars Peterson, filing for bankruptcy does not have to be a life-altering process. After paying off a portion of what you owe creditors through the payment plan, your unsecured debt will be gone, and you can keep your home and car.
Chapter 13 bankruptcy is generally for individuals with higher income and secured assets such as homes and cars that they want to keep.
Stop Creditors ∙ Stop Foreclosure ∙ Stop Repossession
The day you file for chapter 13 bankruptcy, creditors are legally required to stop calling and sending you letters. Chapter 13 stops foreclosure on your home and repossession of your car. Located in Honolulu, we serve clients throughout the islands. For a free consultation, contact us online or call 808.589.1010 to schedule an appointment with a Hawaii bankruptcy attorney.
Hawaii Chapter 13 Attorneys
An experienced, compassionate bankruptcy lawyer can help you navigate the process of filing Chapter 13 bankruptcy in Honolulu. A Chapter 13 bankruptcy lawyer can take over filing the paperwork, offer guidance, and make it, so you never have to appear in court in front of a judge for your bankruptcy confirmation hearing.
When you’re ready to take steps to regain control of your financial health, we’re here to help. Contact attorneys Rick Abelmann or Lars Peterson to discuss Chapter 13 and let us help you determine if this is the right solution for you.