As you may have read during your research of Hawaii bankruptcy, there are two types of consumer bankruptcy in Hawaii, Chapter 7 and Chapter 13, and three factors that are used to determine which type is appropriate for you: income, assets, and debts.
A Chapter 7 Hawaii bankruptcy is sometimes referred to as “straight” bankruptcy, because it cancels or discharges the majority of your debts. From the moment the bankruptcy is filed, all creditors must cease all collection attempts. Until your bankruptcy case ends, your financial problems are in the hands of the Hawaii bankruptcy court. It assumes control of the property you own (excluding your exempt property, which is yours to keep) and the debts you owe as of the date you file. The entire process lasts about three to four months, and generally only requires one trip to the courthouse for a meeting. A Hawaii bankruptcy lawyer can guide you through the process.
The other form of consumer bankruptcy is called a Chapter 13, and is commonly referred to as “restructure of debt,” because it lets you discharge most of the debts by paying all or a portion of them over a three to five-year period. As in a Chapter 7 bankruptcy, the act of filing immediately stops your creditors from taking further action against you. Usually you make payments directly to the court appointed trustee who, in turn, distributes money to your creditors.
In order for a person to correctly file a bankruptcy in Hawaii, the Hawaii bankruptcy court requires many official forms. These forms can be found at the US Bankruptcy Court website and are listed below.
1. Credit Counseling Course Certificate
2. Form B201A
3. B1 Petition
4. B1 Exhibit C
5. B1 Exhibit D
6. B7 Statement of Financial Affairs
7. B8 Statement of Intention (only if filing a chapter 7)
8. B21 Statement of SSN
10. Verification of Creditor Matrix
11. B6 Summary of Schedules, Statistical Summary, Schedules A-J, Declaration
12. B22A Statement of Current Monthly Income and Means Test Calculation
13. Chapter 13 Plan (only if filing a chapter 13)
Forms 1-10 are fairly simple, therefore, just remember to read each question thoroughly before answering. Forms 11-13 can be very complex, and requires special attention.
Form 11-“B6 Summary of Schedules, Statistical Summary, Schedules A-J, Declaration,” is especially tricky regarding the correct application of exemptions. You will need to determine whether Hawaii or Federal exemptions will best protect your assets. There are approximately 25 categories regardless of whether you opt to use State or Federal exemptions.
Next, Form 12-“B22A Statement of Current Monthly Income and Means Test Calculation,” can also be difficult. Part of the issue is that people fail to calculate their wages appropriately, and do not know the local standards for rent, food, etc. Additionally, all types of income must be used in the Means Test, i.e. family contributions, rental income, gross wages (for full-time and part-time employment), alimony, child support, interest income, etc. You must include bonuses and/or overtime in your income, even if you do not consider it regular pay. Finally, make sure to read each section and be certain you understand what is being asked of you before filling in the blanks.
Finally, Form 13 – “Chapter 13 Plan” is unique if you attempting to file a Chapter 13 case. There are approximately four reasons why a debtor may want or need to file a Chapter 13 rather than a Chapter 7 bankruptcy; (1) to pay arrearages on a mortgage to prevent a foreclosure (2) your household income is above Hawaii’s median income, (3) you have disposable income (income that is higher than your reasonable expenses) to pay creditors, (4) you wish to value a collateral item at fair market value (strip a second mortgage or value a car at a specified amount less than what is currently owed). If one or more of these circumstances pertain to you, then a Chapter 13 bankruptcy might be your best option. Be careful, even with extensive research, even the most educated people usually do not succeed in properly preparing a Chapter 13 Plan that satisfies the court’s requirements. A Hawaii bankruptcy attorney can help you file all the necessary paperwork correctly.