Last year, nearly 900 residents of Hawaii sought relief from financial burden and stress by filing Chapter 7 bankruptcy. In the past couple of years, we’ve seen dramatic shifts in the labor and job market, along with rising costs of living and expanding debt. This combined has left many Hawaii residents struggling financially and working their hardest to stay afloat.
Constantly juggling bills is exhausting, and medical expenses, credit cards, loans, car payments, and housing costs just never quit. You don’t have to live with the weight of financial stress and hardship on your shoulders. Bankruptcy is a legitimate option, and it’s one you shouldn’t feel shamed for considering.
Financial difficulties can happen to anyone. We offer compassionate bankruptcy services and place a high value on personal respect and the attorney-client relationship. Let us help you understand everything you need to know about Chapter 7 bankruptcy Hawaii.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a way to relieve that sinking feeling if you’re overburdened with medical bills, credit card debts, and you have creditors contacting you daily in an attempt to collect payment. Anyone can find themselves in this situation due to a change in employment, unforeseen medical bills, or a change in their family or personal circumstances that unsettles their financial footing.
Chapter 7 bankruptcy wipes out unsecured debts and offers a chance for a fresh start through debt relief. Chapter 7 is also referred to as liquidation bankruptcy because some assets that do not qualify as bankruptcy exemptions may be liquidated to repay creditors.
The liquidation of assets is one factor that can scare people off from filing Chapter 7. However, you must pass a means test to file for Chapter 7 bankruptcy, and in all honesty, most people who qualify don’t have many assets that fall outside the exemption categories. For many, Chapter 7 can bring substantial debt relief without impacting their home or quality of life.
Filing bankruptcy may or may not be the right choice for you, but we’re here to answer your questions and help you decide if it’s the best solution.
Eligibility for Chapter 7 Means Test
To file bankruptcy under the Chapter 7 federal bankruptcy rules, you must pass what’s called a means test. The means test tells you right away if you’re eligible for Chapter 7 bankruptcy and is the first thing you should be done before you even think about filling out any bankruptcy forms.
The means test simply looks at your income and compares it to the medium income for your household size where you live.
If you fall below the median income level, you pass the means test for Chapter 7 bankruptcy, and your Hawaii bankruptcy attorney will help you navigate the next steps.
If your income is above the median level, there are still bankruptcy solutions available to you, including Chapter 13, which reorganizes debt into affordable monthly payments.
Chapter 7 Income Limits in Hawaii
The median income in Hawaii changes over time. As your Chapter 7 bankruptcy lawyer, we can help you determine where your household income currently places you on the means test. These numbers offer an idea of the current median income for residents of Honolulu.
- Household Size of 1: Monthly income of $6,033 or an annual income of $72,396
- Household Size of 2: Monthly income of $7,019 or an annual income of $84, 224
- Household Size of 3: Monthly income of $8,002 or an annual income of $$96,021
- Household Size of 4: Monthly Income of $9974 or an annual income of $119,681
- Household Size of 5: Monthly income of $10,724 or an annual income of $128, 681
- Household Size of 6: Monthly income of $11,474 or an annual income of $137,681
*Amounts have been rounded up to the nearest dollar
Which Debts Can Be Discharged in Chapter 7?
A Chapter 7 bankruptcy filing can work towards eliminating the types of debt that burden you every day. Chapter 7 eliminates unsecured personal debt. Unsecured debt refers to debt that doesn’t have any collateral attached to it.
Some types of unsecured debt that can be relieved when filing for personal bankruptcy under Chapter 7 laws include:
- Medical bills
- Personal loans
- Unsecured bank loans
- Court judgments from the unsecured debt owed to creditors
- Unpaid utilities, including phone bills
There are some circumstances in which the bankruptcy code allows certain secured debts to also be forgiven in a bankruptcy case. This can include the filer’s personal liability on car loans if no reaffirmation agreement is signed when filing bankruptcy. A reaffirmation agreement allows you to keep your property, such as a car, by reaffirming that you will continue to make payments on it.
If your home has been foreclosed or your property has been repossessed, you can have the deficiency balances from those secured debts discharged with Chapter 7 bankruptcy.
Which Debts Cannot be Discharged?
Chapter 7 bankruptcy can help wipe the slate clean for many debts, but not all of them. Certain debts are exempt from being included in your Hawaii bankruptcy petition. Debts that are not covered with Chapter 7 bankruptcy relief include:
- Child Support
- Alimony
- Recent Tax Debt
- Government Debt
- Recent Loans Exceeding a Certain Amount
- Court Fines
- Court Penalties
- Damages Owed In Personal Injury Cases Where Drugs or Alcohol Were Involved
Hawaii Bankruptcy Exemptions
Certain types of property and assets can be protected in your bankruptcy case due to state and federal exemptions. It’s important to understand federal and state exemptions for bankruptcy because understanding which assets are protected can make you feel more comfortable and at ease with filing. This list isn’t exhaustive but includes the most significant exemptions in bankruptcy cases.
- Federal Homestead Exemption protects a certain value amount of your home if you are the head of household or are over the age of 65
- Hawaii Motor Vehicle Exemption protects up to a certain value of your vehicle
- Personal property, including household furnishings and other personal property, are exempt up to a certain value
- Retirement accounts
- Pensions
- Tools of the trade, including one commercial fishing boat, one motor vehicle, and other tools
- Insurance
- Wages
- Public benefits
“Automatic Stay” Benefits
An Automatic Stay offers the person filing bankruptcy some much-needed relief from the stress of constant contact and collection efforts from creditors. When you file bankruptcy, an Automatic Stay is put into place, halting collections efforts and notifying creditors that the majority of the attempts to collect the debt against you must stop.
The Automatic Stay is an important part of bankruptcy law. The stress alone of juggling bills is bad enough, but once collection efforts begin, it all seems so relentless. The Automatic Stay provides a little peace during a financially difficult time.
How is Chapter 7 different from Chapter 13?
Chapter 7 and Chapter 13 are the two most common types of bankruptcy for personal filers. Both offer debt management and relief, but in different ways.
The main difference between Chapter 7 bankruptcy and Chapter 13 is that Chapter 7 is a complete debt settlement of most unsecured and some secured types of debt. In contrast, Chapter 13 bankruptcy is debt reorganization, where some debt is forgiven, but most are consolidated into a monthly payment that’s handled by a bankruptcy trustee.
Benefits of Filing Chapter 7 Bankruptcy in Hawaii
- Chapter 7 offers more complete debt relief and forgiveness for filers who meet the income requirements set forth in the Hawaii bankruptcy code
- You can potentially keep more of your personal property under exemption guidelines.
- No monthly payment to worry about
- In most cases, filing for Chapter 7 bankruptcy is less expensive than filing for Chapter 13 because of fewer attorney fees.
Benefits of Filing Chapter 13 Bankruptcy in Hawaii
- Ideal solution for those who are experiencing financial stress but fall above the median income line
- Payments consider the amount of disposable income the filer has
- Can help you get out of home foreclosure or repossession of your vehicle
- Stays on your credit report for a shorter amount of time than Chapter 7 bankruptcy
- You don’t have to appear in a Hawaii bankruptcy court
Costs of Filing Chapter 7 Bankruptcy in Hawaii
The cost to the court for filing local forms in a Chapter 7 bankruptcy case is $338. In addition to this, you’ll also have to pay legal fees charged by your bankruptcy attorney or law firm.
Keep in mind that with Chapter 7, there aren’t any ongoing costs associated with your bankruptcy case. It’s a simple process, and your bankruptcy is discharged in a short amount of time. While the upfront costs of bankruptcy may seem significant when you’re already struggling financially, this really is the quickest and most cost-effective means of achieving financial relief.
Top Chapter 7 Bankruptcy Questions Answered
Most unsecured and some secured debt can be forgiven under Chapter 7 bankruptcy. This includes debts like medical expenses, credit cards, personal loans, and financial judgments for unsecured debt from the past.
The first step to filing bankruptcy in Hawaii is to contact a qualified attorney to discuss bankruptcy options. Many bankruptcy attorneys offer a free consultation, so there’s no risk involved. If you do decide to file for bankruptcy, you’ll have to complete a credit counseling course, and your attorney will review financial documents, including bills, collection efforts, and bank statements.
If there are no objections in your case, Chapter 7 bankruptcy is typically discharged by one of the bankruptcy courts within 60-90 days of your filing date.
In the simplest terms, Chapter 7 bankruptcy is debt forgiveness for filers that meet the financial requirements of the Hawaii Bankruptcy Means Test. Chapter 7 requires creditors to forgive certain debts and stop collection efforts against you.
The financial recovery of filing Chapter 7 bankruptcy begins almost immediately, as an Automatic Stay is put into place and creditors stop collection efforts. Once Chapter 7 is discharged, you can begin rebuilding your financial future because you’re no longer swimming in a sea of debt. From a credit score standpoint, this type of bankruptcy can stay on your credit report for ten years. However, the negative impact on your score begins to diminish significantly over time.
Chapter 7 bankruptcy stays on your credit report for ten years. This may affect how some potential creditors view you and your attempts to attain credit or loans. However, while there may be an initial hit to your credit score, you can work on rebuilding a positive credit profile and notice improvements in your credit rating in a relatively short amount of time.
Hawaii Chapter 7 Bankruptcy Attorneys
Are you ready for a fresh start and to leave unending financial stress in the past? The first step is to seek a free bankruptcy evaluation and understand your options and how bankruptcy can affect you.
At Abelmann Peterson, we have years of experience with Hawaii bankruptcy law and have helped many clients find financial peace. We’re here to help you understand and navigate you through every step of the process of filing bankruptcy in Honolulu, from filing paperwork and dealing with creditors to guiding you to the best debtor education course to fulfill that requirement before filing.
Contact Rick Abelmann or Lars Peterson at Abelmann Peterson Law and let us answer all of your questions.
“I wanted to thank you for your help on my case. You went above and beyond the call of duty and I really appreciate it. You fought for my case like it was your own. You are a great asset to me, my family, and my case.”
– Mike & Mary
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