- How much might a Chapter 7 bankruptcy cost, and how do you know if you’re eligible to even file?
- What alternatives exist and what exactly do they entail?
We’ll make sure to answer all these questions and more below. However, if you’d like to jump straight into things, we have a calculator which will help you estimate your filing qualifications and costs. Feel free to click below and get started.
1) How Chapter 7 Bankruptcy Works in Hawaii
How Fast Do You Get Relief in A Chapter 7 Bankruptcy in Hawaii
It usually takes around 120 days to wrap up a no-asset Chapter 7 case in the state from start to finish. A "no-asset" bankruptcy means that you don't own any fancy houses or other valuable assets that might exceed the Hawaii bankruptcy exemptions. So, if you're in a situation where you don't have an excess of assets, you could be looking at a relatively speedy resolution to your bankruptcy case.
How Much Does It Cost To File Chapter 7 Bankruptcy in Hawaii
The cost of filing a Chapter 7 bankruptcy usually hovers anywhere from $500 to $3,000 in the US. But it can vary depending on specific location, your lawyer’s experience, and the difficulty of your case.
In Hawaii, specifically Honolulu, you might expect to pay around $1,300 to $2,600. However, it could change drastically if you file in another city or island.
With that said, there are also filing fee waivers which can help reduce the cost associated with filing bankruptcy. If you’d like to learn more and see if you qualify, click here: Hawaii filing fee waiver.
How Do I Qualify For Chapter 7 Bankruptcy in Hawaii?
When reviewing whether you qualify for Chapter 7, you may want to check the Chapter 7 Bankruptcy Hawaii Income Limits. This test determines if you're eligible for a bankruptcy discharge (another way of saying your debts will be forgiven). If you pass the means test (you can estimate it below), Chapter 7 will cover most of your unsecured debts. Unsecured debts don't have any collateral, such as medical bills, personal loans, certain old income tax debts, old utility bills, credit card debts, and most personal judgments.
What about secured debts in Chapter 7?
If you want to wipe out secured debts such as car loans and mortgages, Chapter 7 bankruptcy might still be the answer. But the catch is that you'll have to give up the asset to the creditor, and the creditor will consider it as full payment for what you owe.
IMPORTANT: Chapter 7 Qualification via Hawaii Means Test
A tool to help you determine your eligibility for Chapter 7 bankruptcy in Hawaii is the Bankruptcy Means Test. This form will help calculate your average annual income based on your last six months of gross income. It will then compare that number to the median income of other households in Hawaii. If your median income turns out to be below the Hawaii median income, you might qualify for a Chapter 7 bankruptcy discharge.
Feel free to use the calculator below:
My Income Exceeded The Chapter 7 Means Test Allowable in Hawaii
If your income is higher than the median income in your state, you might need to dive into part 2 of the means test or explore an alternative option. We encourage you to check out this helpful resource: passing the Chapter 7 means test when income exceeds the median.
Chapter 7 Bankruptcy Hawaii Income Limits
If you're filing for bankruptcy in Hawaii on or after November 1, 2024, here are the limitations for income based on household size:
Will I lose my belongings if I file Chapter 7 bankruptcy? Understand Hawaii bankruptcy exemptions.
Bankruptcy exemptions are an important tool to consider as they allow you to protect assets that might be prone to being seized by creditors. Oftentimes, the most important exemption is the home equity exemption. In Hawaii, this exemption allows you to protect up to $25,150 if you’re filing alone or $50,300 if you’re filing jointly.
There are also a few other exemptions to be aware of. This includes a motor vehicle exemption of $4,000 and exemptions for a reasonable amount of personal items. There is also a retirement exemption which allows you to safeguard retirement funds and pensions.
Regardless of age or marital status, you can shield up to $150,000 of your home's equity value
One last thing to consider is that Hawaii does allow for federal bankruptcy exemptions. Therefore, you must be mindful of choosing which set of exemptions best covers your current assets.
Chapter 7 Bankruptcy Hawaii Pros and Cons
Pros
- The speed at which you can receive a discharge: In just about 120 days, you could be debt-free and on your way to building a fresh start.
- Property exemptions: If you meet the threshold for exemptions, filing for Chapter 7 bankruptcy may allow you to keep a good percentage of your personal property.
- Stopping debt collection lawsuits: Once you file, the court will issue an automatic stay, preventing legal action against you, including calls and letters from collectors.
- Loan deficiency: When you owe more on a loan than the collateral is worth, you may be stuck with a deficiency. But with bankruptcy, that burden could be lifted.
Cons
- Income requirements for qualification: To be eligible for Chapter 7 bankruptcy, you must meet specific income requirements.
- Potential loss of home and belongings: If your assets exceed the exemption limit, there is a chance that you may have to part ways with some of your property.
- Negative impact on credit report: Filing for Chapter 7 bankruptcy can have a lasting effect on your credit report. It stays on record for a decade, making it challenging to secure future loans or favorable interest rates.
- Non-dischargeable debt: It's important to note that not all debts may be discharged through Chapter 7 bankruptcy. Specific obligations, such as student loans and child support payments, are typically not eligible for discharge.
2) Alternatives to Chapter 7 Bankruptcy in Hawaii
a) Chapter 13 Bankruptcy in Hawaii
If you earn more than the income limit for Chapter 7 bankruptcy, there's still a way to get some debt relief through Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in Hawaii allows you to restructure your debts into a more manageable monthly plan. This restructuring can help you keep your home and vehicles, help stop foreclosure, and prevent repossession of your belongings. Furthermore, you might be able to reduce any unpaid child support, alimony, and car loan payments.
Can you afford Chapter 13 bankruptcy?
If you are considering a Chapter 13 bankruptcy, you can use this calculator to help estimate whether you can manage the monthly payment.
b) Debt Settlement/Relief
Debt settlement may also be another option aside from Chapter 7 and Chapter 13 bankruptcy. Once you pursue this option, the debt settlement company negotiates a lower amount on your total debt, saving you money in the long run. However, consider its impact on your credit score and do proper research to choose a well-reputable and transparent debt settlement company.
c) Debt Management
Another option is debt management. Whereas debt settlement companies work to lower the total amount of debt you owe, debt management companies work to lower your interest rates. These programs usually last 3 to 5 years and are typically a bit pricier than debt settlement. Not all creditors may be willing to work with a debt management company.
However, if you're dealing with a bunch of high-interest credit card debt, this option may reduce that interest by around 10-20%. This could translate to an eventual 30-50% savings on the debt you currently owe and allow you to pay off these debts more efficiently. Considering your situation and determining which option makes the most sense financially is essential.
d) Debt Payoff Planning
The last alternative we'll mention is debt payoff planning. This strategy does take some effort and will require you to cut your expenses and save excess income to pay down as much debt as possible. However, you can make tangible progress every month by choosing the appropriate debt payoff plan. Another thing to remember is that as you begin to pay off your debts, you will be able to compound those payments towards the remaining debts, allowing you to pay things off faster and faster.
Conclusion
Now that you've read this article, hopefully you feel more informed about the requirements and potential alternatives. If you're interested in a quick estimate of your qualifications and potential costs, you can use the Chapter 7 bankruptcy means test calculator below.
For a more detailed understanding of the process of filing Chapter 7 bankruptcy, feel free to explore our comprehensive guide on the Chapter 7 bankruptcy process. It provides a complete rundown of what you can expect throughout the procedure.
Lastly, if you're looking to reduce attorney fees and are willing to take on some tasks yourself, we have an article about filing bankruptcy without an attorney. You can find it here: filing bankruptcy without an attorney.