Protecting Assets from Liquidation in Chapter 7
Hawaiian Chapter 7 Bankruptcy Attorney Offers Compassionate Guidance
Honolulu Bankruptcy Firm Knowledgeable in Chapter 7 Cases
In a chapter 7 bankruptcy, a debtor has the chance to wipe out most or all of his debts and get a fresh start. Chapter 7 is also known as liquidation bankruptcy because, in theory, the bankruptcy trustee will collect all the debtor's assets and sell, or liquidates any non-exempt assets and use the net proceeds to pay off creditors. In the vast majority of Chapter 7 cases in Hawaii, however, no assets are liquidated because exemptions are usually sufficient to protect the assets of bankruptcy filers.
If I File for Chapter 7, How Much Property Can I Keep?
Bankruptcy law allows for exemptions, or dollar amounts of property a debtor is allowed to keep when he files for bankruptcy. Common exemptions allowed include a debtor's equity in his:
- Retirement accounts
- Household items
Hawaii law allows debtors to choose to use the state's exemptions or the federal list, but not both, and there are variations between the two. For example, Hawaii allows a $30,000 homestead exemption for a debtor's residence if the debtor is head of household or at least 65 years old, and a $20,000 homestead exemption for others. The federal homestead exemption is $22,975. The federal vehicle exemption is $3,450 while Hawaii's state vehicle exemption is $2,575. In addition, the federal bankruptcy code offers a "wildcard" exemption that can be used to raise the exemption limits for motor vehicles or other assets, or to protect otherwise non-exempt assets. The federal "wildcard" exemption is $1,225 plus up to $11,500 of the unused amount of the homestead exemption. There is no "wildcard" exemption under the state law exemptions.
If a debtor wants to keep personal property that is secured by a loan, he may do so by paying the creditor the fair market value of the property in order to redeem it, or by formally reaffirming the loan. When a debtor signs a Reaffirmation Agreement, the reaffirmed debt cannot be discharged in the bankruptcy case and the debtor will be required to continue to pay on it. For personal property, including vehicles, if the debt is not formally reaffirmed the secured creditor may have the right to repossess the collateral after the automatic stay terminates — even if the loan is current. Some bankruptcy filers choose an unofficial middle option of keeping the loan current without reaffirming the debt, taking a chance that the lender will not exercise its right to repossess the collateral if the loan is current. This enables the debt to be discharged in the bankruptcy case.
There are certain types of debt that cannot be erased in a chapter 7 bankruptcy, including:
- Child support
- Fraudulent debts
- School loans
- Certain taxes
Get Help from an Experienced Bankruptcy Attorney in Hawaii
Are you are considering filing for chapter 7 bankruptcy in Hawaii? The Law Office of Jean Christensen LLLC will guide you through the complex debt relief process with care, compassion, and the personal attention you deserve. Contact us online or call 808-521-1202 to schedule your free initial consultation at our Honolulu office conveniently located at 1165 Bishop Street.