What Property Can I Keep?
The stereotypical perception of bankruptcy is that a person or family will lose absolutely everything they own to creditors and banks. However, this perception is far from the truth. Under the Bankruptcy Code, Hawaii residents can keep a certain amount of property by exempting it from their creditors. The exact circumstances vary from case to case, and our attorneys can help explain how this may affect your own situation.
The founding fathers specifically wrote the Constitution with a clause about bankruptcy because they sought to end the scourge of debtor’s prisons in our young nation. Far from being a punishment, a bankruptcy is a solution that allows you to resolve your debts while still keeping the property you need to survive.
State vs. Federal Exemptions
The State of Hawaii allows individuals filing for bankruptcy to claim exemptions under either the state or federal guidelines. Although the specifics will vary depending on the circumstances, generally the federal bankruptcy exemptions are more favorable to our clients. Our experienced lawyer can guide you through the best path that will allow you to maximize the property you can keep.
Generally, Hawaii bankruptcy filers can keep:
- The equity in a home for $25,150 per person (double for married couples)
- Motor vehicles, up to $4,000 (double for married couples)
- A reasonable amount of clothing (most debtors keep all clothing)
- A reasonable amount of household goods and furnishings (most debtors keep all household goods and furnishings)
- Household appliances and jewelry, up to a certain amount (most debtors keep all appliances and jewelry)
- Retirement funds and pensions
- Tools of the debtor’s trade or profession, up to a certain value
- A portion of earned wages not yet paid
- Public benefits, including public assistance such as welfare and Social Security
As you can see, you don’t lose everything in a bankruptcy. The federal government designed bankruptcy so that ordinary families that have fallen on hard times can work their way back into stability — no debtor’s prisons, no losing what you need to survive, no destitution.
Most Chapter 13 Filers Save Their Home and Car
Both Chapter 7 and Chapter 13 bankruptcies allow ordinary, everyday people who have gotten in over their heads with debt keep equity in their homes, vehicles, and certain items of property during the bankruptcy process. Filing under either Chapter 13 or Chapter 7 bankruptcy will stop foreclosure, stop repossession, and stop wage garnishments.
However, many people who choose a Chapter 13 payment plan can save a home and car by catching up on the past amounts owed and becoming current with payments after the bankruptcy is concluded.
Differences Between Chapter 7 And Chapter 13
You may be wondering why it is that Chapter 7 bankruptcy leads to potential losses while Chapter 13 bankruptcy can sometimes save your car, home, and other possessions. The key difference is in how the debts are repaid in the separate chapters.
With Chapter 7 bankruptcy, your debts are usually considered unrepayable through income or a financial restructuring of any kind. Your debt repayments occur through a liquidation of assets. This is why with Chapter 7 you may lose valuable items. Those items are essentially how you are paying off your debts.
This is also why you want a lawyer. Through our firm, we can help you find exemptions and protect your most important assets before the liquidation process. Many of our clients who have filed for bankruptcy managed to even re-purchase assets they lost, such as a home, while they were in the middle of filing for bankruptcy. We will assist you throughout this entire process.
Through Chapter 13 bankruptcy, your debts are seen as something that can be paid off, but you have so many of them that you will be in an endless interest rate cycle if you continue living with them. Before you can qualify for Chapter 13 bankruptcy, you must meet the qualifications for it. They are usually related to how much income you have and how many debts you currently have under your name.
If you do qualify for Chapter 13, then all your debts will be rolled into a single payment that you will be able to pay in monthly lump sums. This is why you don’t typically lose any assets while filing for Chapter 13 bankruptcy. Since you can pay off your debt through payments, you aren’t required to give up valuables to do so.
No matter the bankruptcy you do end up with, you will need a qualified and experienced firm like Blake Goodman, PC, Attorney to handle your case. Do not handle this on your own. Hire our firm. You will be glad you did.