The following discussion is for general reading purposes only. Accordingly, anything stated herein should not be relied upon as a legal opinion for your particular fact situation.
Filing bankruptcy in Hawaii - what is the process
Bankruptcy case law changes constantly and sometimes daily, accordingly statements contained herein may not be current and up to date with the constant changing court decisions being rendered around the country each and every day. Also every state has their own interpretation of the bankruptcy code, so one issue in Kentucky may be decided one way but in Hawaii a very different result may result concerning the same issue, therefore if you are considering filing for bankruptcy, you should retain the services of an experienced bankruptcy attorney in the state of your residence before filing.
The biggest change was the adoption of the median income and the means test. People have also gone to prison for giving false testimony to the trustee and for hiding or concealing assets. Some debtors had their discharge set aside because they failed to cooperate with the trustee's orders. If you don't prepare your petition and schedules accurately and your case is dismissed for abuse, then you may find that you may not be able to discharge your debts and you may also lose non-exempt assets as well.
How often can you file for Bankruptcy if you filed before? You cannot file for a Chapter 7 case if you filed another previous Chapter 7 case within the last 8 years. If you previously filed a Chapter 7 case you must wait 4 years to file a Chapter 13 case. If you previously filed a Chapter 13 case you must wait 2 years before you can file another Chapter 13 case. Chapter 7 and Chapter Essentially a Chapter 7 does not require that you make any payments to obtain your discharge.
Once you file a chapter 7 and you want to dismiss the case, good luck, it is extremely difficult to voluntarily dismiss a chapter 7 case, which would require good grounds and court approval. A chapter 13 however can be dismissed by the debtor at any time. Why File for Bankruptcy? Most people file for bankruptcy because they are not able to pay their credit card debts and at the same time make ends meet. Some have maxed out their credit cards and no longer use them, while the payments that they make goes only towards the interest and does not reduce the principal.
Others have tax debts, are facing foreclosures or are being garnished or facing lawsuits. For these people filing for bankruptcy has the following benefits:. The following debts will not be discharged in your bankruptcy case. This may not a complete list of debts not discharged in a bankruptcy case, also as the amounts may be updated as the law changes, so it is advised that you review the most current version of 11 USC Section for any changes:. First of all what is property? Property is anything and everything that you own directly, or indirectly, or property that you have access to, dominion and control over, or have a beneficial interest in.
Where to File
Even if you didn't buy property, for example if someone gave you an item as a gift, it is still property that must be disclosed. If you have lived in Hawaii for two years, you can claim either 1 Hawaii state exemptions under the applicable Hawaii Revised Statutes, or you can claim the 2 Federal bankruptcy exemptions under 11 USC d click here to see this federal exemption http: If you have not lived in Hawaii for the last two years you cannot claim these exemptions, as it will depend on the state that you previously came from.
This is actually a difficult question and it takes an experienced attorney to go over the various options with you depending on the facts of your case. Benefits of Filing a Chapter 13 Explained: Chapter 13 allows you to pay something back to your creditors over a period of time usually 3,4 or 5 years. Even if you pass the median income or means test and qualify for a Chapter 7, you may still want to file a Chapter 13 because of the following benefits that a Chapter 7 does not offer:.
As discussed above you can save your residence from foreclosure by filing a Chapter 13, essentially the bankruptcy law allows you to stretch out the delinquent balance that you over the term of your plan. You must however continue to make the regular mortgage payments after you file your bankruptcy. If you have a second mortgage or home equity loan that is "under water", or not secured by equity in your residence, you can also "strip off" but not "strip down" this second mortgage by having your attorney filing a Motion to Value Collateral under 11 USC with the court seeking to strip off this second mortgage.
Since the second mortgage is completely "under water", your Chapter 13 plan can provide for the stripping off of this second mortgage, and the lender will receive whatever the other unsecured creditors will receive under your plan, so when you complete all of your required plan payments and get your discharge, you will no longer have a second mortgage to pay on your home.
Thus if you live in another state you may or may not be able to strip off a second mortgage, as it would depend upon court rulings in your state this is another example of how different states have differeing decisions on the same issue and why it is so important that you retain a bankrutpcy attorney in your state when you file. If the second mortgage is partially secured not completely under water then you cannot strip it. If you file for Chapter 7 you cannot strip off a junior lien, said the U. Supreme Court in the Nobelman v. American Savings Bank case.
Totally different rules apply to investment real estate. Not only can you "strip off" a second mortgage that is totally underwater like you can for your residence, but you can also "strip down" your second mortgage even if it is only partially underwater. In addition, you could even "strip down" a FIRST mortgage too, if that loan is partially underwater to the value of the collateral, this would allow you to reduce your mortgage payments if the property is worth less than the mortgage balance since the secured portion would now be limited to the fair market value of the property and not the entire loan balance.
The loan balance that exceeds the fair market value of the real estate would be treated as an unsecured claim and could be paid back at pennies on the dollar.
How is this possible when it comes to investment real property? Well, Section of the Bankruptcy Code provides that a lien is only secured to the extent there is value in the asset to which it attaches. If a claim exceeds the value of the collateral, that portion of the claim is considered unsecured. As a result, in a Chapter 13, even voluntary liens like mortgages and trust deeds can be stripped down to the value of the collateral as it concerns investment real property not your residence or home unfortunately. Why is this provision not available to your residence or home?
The effect of this is to eliminate a "lien strip down" on residential real property that is the principal residence of the debtor, so unless Congress changes the law in the future, it is what it is for now. Whether you may keep investment real property while filing for bankrupcy is another issue. If it is your primary source of income that you rely upon to meet your daily living expenses, there are cases that have allowed certain debtors to keep the property, if however, you have negative cash flow there are cases that say you may not keep the property because it would be at the expense of paying your other creditors.
Once again your attorney should be able to give you some guidance on this based upon case law precedent in your jurisdiction. You can also stretch out your automobile loans over the length of your plan, as well as lower your interest payments to the "till rate", this could result in lowered monthly auto payments for you. If your purchase money auto loan was taken out more than days ago, you could also strip down your auto loan to the current value of your car as well as get rid of cross collateralized loans , this could also result in a lowered loan balance for you.
Stripping an auto loan down to the value of the collateral however requires that your attorney file a separate motion with the court i. Motion To Value Collateral under 11 USC and if you use a value that is less than retail value here in Hawaii, expect an objection and possible trial on the matter from the secured creditor. The litigation in this area is in determining the "replacement value" of your car under 11 USC a2.
Unfortunately the bankruptcy code did not say whether you can use retail value, private party value or wholesale value and therein lies the problem. In the 9th circuit, the court's starting point for valuation is the "retail value" of the car, and from there the value can be reduced depending upon the condition of the vehicle, but you would need reliable repair estimates from third parties, or hire an expert to testify on your behalf if you seek to reduce your car's retail value, see http: From a practical standpoint however it may not be economically feasible to go to trial on this issue, especially when factoring in added attorney's fees for trial and expert witness fees, so to be 'safe' consider using the "private party" sales value under KBB.
For purchase money loans for other personal property non-automobile , like furniture for example, Section a has a one year "waiting period" before a cram down of the purchase money loan can be pursued. You can keep non-exempt property under Chapter 13 if you can pay to the Trustee the "non-exempt" portion during the lifetime of your plan, whereas in a chapter 7 you would have to surrender the non-exempt property to the trustee. Debtors can do some exemption planning prior to filing bankruptcy, however if it is done to hinder, delay or defraud your creditors then it would be a bad faith filing and you may not receive your discharge from the court.
Thus exemption planning does have its limitations and should not be done without a proper recognition of the potential negative consequences. If you file for bankruptcy and another person co-signed the credit card or loan for you, their credit rating would also be affected and the creditor could go after them for the balance if you file for Chapter 7 and discharge that debt, if however you file for Chapter 13 and pay off that loan under your Plan, then the creditor cannot go after that person while you are in bankruptcy, this is called the "co-debtor stay" their credit however will still be affected due to your default.
Some aggressive trustees take the position that payments that the debtor makes within 90 days could be a preferential transfer to the co-signer. You do not pay interest on your unsecured credit cards in a Chapter So each dollar paid under your plan towards those creditors will reduce your outstanding balance "dollar for dollar", when you think about it, its like getting an interest free loan to help to pay off or down your credit cards.
If you fail the I and J test for example you have significant disposable income you may have to file a Chapter 13 i. Determining how much you must pay under a Chapter This six month period for calculation purposes ends on the last day of the month directly preceding your bankruptcy filing. This first test is based upon your family size and income.
In re Durczynski B. Ohio - where the court also looked at past refunds to determine prospects of receiving future refunds. Although there is a split in the circuits on this issue, the U. Trustee's office has taken the position that unemployment income is not a "social security benefit" and therefore must be reported as income under the median income test. Income that is excluded from the median income test would be social security, social security disability, food stamps and other "social security act related benefits," see 11 USC , paragraph 10Ab.
Debtors who fail the median income test must now commit to a 5 year chapter 13 plan, unless he or she can pay off his creditors percent, in less time. A lot of the litigation today focuses on this means test.
It should be noted that in June of , the U. Supreme Court in Hamilton v.
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Lanning said that the "six month average" used in the means test can sometimes be too mechanical and the courts should therefore take into account a "forward looking approach" and consider certain income to be earned in the future of the debtor. In this case the prior six month average was higher than the debtor's present income from a new lower paying job, this because there was a onetime payment or a buyout from her former employer that was included during the preceding six month period.
This was not an invalidation of the means test but can be used only in limited cases. No one said bankruptcy under the new law was easy, I consider it to be one of the more difficult and challenging areas of the law due to the dynamics involved and the constantly changing and sometime contradicting court decisions from state to state. To view a copy of the form for the means test, click http: Unless you are an experienced attorney familiar with the myriad means testing issues, it is extremely difficult to complete it on your own properly.
Bankruptcy – Hawaii frequently asked questions
In certain situations even if you have a positive DMI or number after you conduct the means test you could still file a Chapter 7. I shall refer to this as " built in statutory exceptions to the means test. Arriving at the final number under the means test is not a simple task, for example under the means test, social security is not considered income, however in Schedule I you must list it down as income. Theoretically, you could pass the means test but if Schedules I and J shows disposable net monthly income because of your social security income, the Trustee's office would challenge your request for a Chapter 7 discharge forcing you to convert to a Chapter 13 repayment plan instead.
See in re Booker which was a Missouri case. Exception to the Means Test: If a majority of your debts are "business debts" and not "consumer debts," then you are exempt from taking the means test and could file a Chapter 7 instead,. In a recent case, the 9th circuit ruled that income taxes are not "consumer debts", see http: What happens if only one spouse files?
If you want to read more about it, please read my other article at: Schedule I and J Test: If you pass the median income test then you could file for a Chapter 7, but in the 9th circuit you must also pass the "Schedule I and J" test before you can get your discharge even if you pass the means test you must pass this test as well. Under Schedule I you report all of your income and all of your payroll deductions.
The trustee objected and said those amounts should be committed to plan payments instead. The appeals court agreed with the trustee. Thus, ongoing retirement account contributions were not within the scope of section b 7 A and were forbidden. Park therefore stands for the proposition that an above median income debtor cannot continue payroll deductions for a voluntary retirement account, such as contributing to a k during a chapter 13, but the Court also ruled that k loan repayments could, continue during a chapter 13 plan, this based upon section f which specifically allows for retirement loan repayments during a chapter This decision was limited by In re Bruce Bankr.
In Schedule I the debtor deducted k contributions and loans. The Court considered the debtor's age, balance in his k, other sources of retirement, and concluded that the proposed k contributions in the Bruce plan were permissible. The k contributions in this case are reasonably necessary for the maintenance and support of the debtor and his dependents" said the court. The court distinguished itself from the decision in the Park case because that case dealt with an above median debtor. Voluntary contributions to a k plan are not necessary expenses under the means test.
By contrast, the current monthly income of Mr. Bruce and his spouse is below median. Brown, Chapter 13 Bankruptcy, 4th Ed. In re Fields, B. What does this all mean for Chapter 13 debtors? The trustee will look to the debtor's individual circumstances i. For more, see, In re Ng, a Hawaii case: See 11 USC f which allows loan repayments to be left alone in a Chapter 13 plan. Voluntary Retirement Loan Contributions and Retirement loan repayments. Can you claim it in your budget on Sch J?
So in a nutshell, there is no automatic right to deduct these amounts as expenses and the Trustee's office will scrutinize them on a case by case basis. Factors that they look to is whether the debtor is on a constrained budget or not, other factors include employment security, age of the debtor, k balance, whether there are other pensions or sources of retirement income the debtor is also entitled to, and the amounts being contributed.
For more on this where the debtor prevailed over the Trustee's motion to dismiss, see In re Wilma Horn. The Trustee will also look at how long the debtor was making his contributions prior to the bankruptcy filing. Ironically, although you can deduct k loan repayments in a Chapter 13 case under 11 USC f, it is not automatically allowed in a Chapter 7 case.
Factors the Trustee will look at includes the debtor's overall budget, as well as when the loan was taken out and what the loan proceeds were used for special circumstances may apply for example if the loan was taken out for medical emergency for example , also considered is the amount of the monthly loan repayment and when the loan will be completed. Whether the debtor who is on a shoe string budget and is sacrificing a necessity such as food to make a TSP loan repayment or contribution may stand a better chance of withstanding an objection versus another debtor whose budget is not as constrained and whose car payments are higher than normal.
Under b2 the burden of persuasion shifts to the debtor to prove "special circumstance" to rebut the presumption of abuse. Under b3, the U. The chilling factor is that you could be liable for attorney's incurred by the Trustee's office if you lose under a motion to dismiss or to convert filed under b. Therefore if you contribute to religious organizations, you should write a check to document your charitable giving expenses.
Are visitation travel related expenses allowed on Schedule J: If you are divorced and you have minor children living on the mainland and you want to see them can you factor in transportation or air fare costs as part of your budget? Generally speaking, costs related to purely recreational vacations or trips are not allowed as an expense, however this issue has a twist to it because it has to do with custodial visitation rights of a divorced person.
I haven't had a case with this issue yet, but an argument can be made that it is vital that visitation related travel costs be allowed for the general good, health, and welfare of children and of the parent, Although this issue was not specfically decided upon in a case that I found, the bankruptcy court recognized the life changing and career related sacrifices that the debtor father made just to be close to his twin minor children when their mother moved them from state to state apparently in an attempt to prevent the father from seeing his own children.
The court emphasized the importance and need that the debtor father see his children, implying then that any resulting travel costs related thereto would probably have been allowed, see http: The court stated that it is simply not prepared to find in BAPCPA, or former section b1, congressional intent to penalize a debtor motivated by concern for his children. Why is this so? This explains why the expenses that you claim on your Schedule J must be reasonable, necessary and not excessive or lavish.
Filing for Bankruptcy in Hawaii
For this case see: In re Aprea B. In other words just because you pay for an expense does not mean that it will be allowed by the court, what matters is whether your expenses are reasonable and necessary and whether you have done some "belt tightening" on your own prior to filing for bankruptcy. You may be able to apply the means test, where the courts will look at your average income for the six months before filing, and compare it to the median income in the State.
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The results of that test will determine whether you can apply for a Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy gathers and sells assets in order to pay creditors. While a Chapter 13 bankruptcy requires a proposed repayment plan. In order for you to file everything properly, the help of a competent lawyer is always a good idea. They can assist you with putting all of your aforementioned paperwork together should you have any questions or additional documents to add. Find a Bankruptcy Attorney Now Your attorney will help you file the necessary forms as outlined by the Hawaii Bankruptcy Court , which will need a description of your current financial status, and recent transactions.
It is important for these forms to be filled out entirely, and correctly. If creditors or the judge feels as though the information is missing, your petition can be jeopardized. If you have any questions about how to file for bankruptcy Hawaii, or what it means for your business, your attorney should be familiar with the corporate law in Maui, and around Hawaii. Their dedicated and compassionate staff will be there for you every step of the way, so you know exactly what will happen. You do not need to deal with the stress and hardship that comes from bankruptcy alone.
The right attorneys will know exactly what needs to be done for the Hawaii Bankruptcy Court, and how to do it, in order for you to trust that your bankruptcy claim will be handled with ease. You must be logged in to post a comment. Contact Cain and Herren law cainandherren. File for Bankruptcy Hawaii with a Credible Attorney Whether you have financial trouble in your personal or professional life, filing for bankruptcy Hawaii is not easy to do alone.
Types of Bankruptcy There are four different types of cases: