Hawaii Bankruptcy Facts

Paying bills is a part of everyone’s life, but there are times in which expenses pile up to the point that there is no foreseeable way of getting them down. If you live in Hawaii and have been struggling with severe debt from unpaid credit card bills, business expenses or medical costs to the point that creditors have begun to harass you, relief may be closer than you think. Bankruptcy is a tool many Hawaiians use to protect themselves against creditor threats, like foreclosure, and to get rid of towering debt.

If you are tired of dealing with financial obstacles, below is some helpful information regarding bankruptcy to assist you in getting rid of your debt once and for all.

What is Bankruptcy and How Can it Get Creditors Off Your Back?

Bankruptcy is a process in which a debtor seeks court approval to either reduce or eliminate their debts altogether. It can be filed by both individuals and business, as long as they unable to pay creditors what they owe and pass the necessary prerequisites for approval. Filing involves petitioning the court under one of the six types of bankruptcy under the Bankruptcy Code, which are known as “Chapters.”

The majority of people file for either Chapter 7 liquidation bankruptcy or Chapter 13 reorganization bankruptcy in Hawaii because they are not only the most basic, but they are the most widely accepted. Both of these chapters can get rid of debt, but they do so in very different ways.

Regardless of which chapter is filed, however, from the moment a petitioner is approved for bankruptcy, creditors will immediately back off. Bankruptcy prevents creditors from coming after certain assets like a debtor’s home or vehicle during proceedings, which is why many debtors chose to file. After all, it’s not called bankruptcy “protection” for nothing!

But before bankruptcy can even be filed, it’s important for all debtors to carefully review what each bankruptcy chapter does and what it is mostly used for. Let’s take a closer look at Chapters 7 and 13 of the U.S. Bankruptcy Code and learn about what each can and cannot do to help you pay your bills and get creditors to back off.

Hawaii Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most popular petition in Hawaii for several reasons. First, both individuals and businesses may file, as long as they pass what is known as the “Means Test” to determine if their income is low enough to merit bankruptcy protection. Second, Chapter 7 has the power to completely discharge all of a debtor’s financial obligations with creditors, making it a very appealing choice.

If you are approved for Chapter 7 in Hawaii, some of your assets will be liquidated to cover debts owed to lenders. However, certain items are exempt from creditor seizure, including the debtor’s home, retirement accounts and personal effects like clothes, so if this is the chapter you would like to file, you don’t have to worry about creditors taking all of your valuables.

This chapter is also popular because debtors can exit bankruptcy in as little three months. Most debt can be completely wiped out with Chapter 7, as long as the debt is unsecured, meaning it is not already backed by assets.

Hawaii Chapter 13 Bankruptcy

Another option for Hawaiian debtors who have more debt than they can manage is Chapter 13 bankruptcy. Unlike Chapter 7, Chapter 13 bankruptcy does not liquidate your debts, but instead, allows you to get on a payment plan to repay creditors what you owe them. This chapter can only be filed by individuals and since assets are not liquidated, it takes more time for debtors to exit from bankruptcy (typically anywhere between three to five years).

This is a good option for those who do not qualify for Chapter 7 because they make too much money or for individuals who are seeking protection against foreclosure. Chapter 13 can buy you some time to reduce your debts without having the stress of a looming foreclosure.

If you are ready to file for bankruptcy, turn to a skilled bankruptcy lawyer today to discuss the best solution to your financial struggles.