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Bankruptcy Option #1: Chapter 7 (Fresh Start)
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A Chapter 7 Bankruptcy filing may be appropriate for you if your debts consist mostly of credit cards, medical bills, auto loan deficiencies, other unsecured debts. These kinds of debts can be wiped out entirely ("discharge" in bankruptcy language), in most cases, in order to give you a new beginning and a "fresh start."
Home Equity: You may keep up to $20,200 individually or $40,400 as a married couple filing bankruptcy and still qualify to file under Chapter 7. Your mortgage debts, however, would not be affected by the Chapter 7. If you have more than $20,200 individually or $40,400 married filing jointly in equity in your home or if you are several months behind on your mortgage payments and facing possible foreclosure, then a Chapter 13 Bankruptcy filing may be more appropriate for you. (See Option #2 following this description).
Non-Dischargeable Debts: A Chapter 7 Bankruptcy also does not wipe out most tax debts, student loans, child or spousal support obligations, or court fines and traffic tickets. If you do have outstanding traffic tickets which are preventing you from having a suspended driver's license re-issued, a Chapter 13 Bankruptcy filing would be the better option since that would enable you to recover your driver's license usually within a few days of filing the bankruptcy petition.
Time: A Chapter 7 Bankruptcy takes about four to six months to run from start (when you hire us) to finish ("discharge"). It normally takes about two to three appointments to have your case ready for filing. You are required to attend one hearing about a month after your bankruptcy petition has been filed with the court. The purpose of the hearing is for you to verify, in person, that all the information you provided in your bankruptcy petition was accurate and complete. The hearing is conducted by a bankruptcy trustee who is appointed by the court to review your file. The main job of the trustee is to make sure that you don't have any non-exempt assets which could be sold and used to pay your debts.
Exempt and Non-Exempt Assets: Exempt assets are those things you get to keep, such as equity in your home (up to $20,200 for an individual or $40,400 for a married couple filing bankruptcy), household goods and furniture, clothing, most vehicles, retirement funds, etc. Non-exempt assets are those things which you don't get to keep under Chapter 7. These would consist of home equity in excess of $20,200 for an individual or $40,400 for a married couple filing bankruptcy and other valuable items which generally are not necessary for your everyday living after you receive your fresh start. The great majority of people who file under Chapter 7 do not have any non-exempt assets. They get to keep everything they own. This is something we would discuss with you during the free consultation.
Hawaii Property Exemptions Include:
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$30,000 equity if family head or if 65 or more years old for real property owned by debtor; $20,000 equity if any other person for real property owned by debtor.
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100% for necessary household furnishings and appliances, books and wearing apparel used by debtor and family.
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$1,000 for jewelry, watches and items of personal adornment.
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$2,575 equity in one motor vehicle.
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100% in tools, implements, instruments, uniforms, furnishings, books, equipment, 1 commercial fishing boat and nets, 1 motor vehicle, and other personal property used in trade, business or profession.
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100% in qualified retirement plans like a 401(k) or IRA.
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100% in disability insurance proceeds.
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100% in workmens' compensation benefits.
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100% in social security, unemployment compensation, veterans' benefits and public assistance.
Relief Obtained by Filing: The filing of a Chapter 7 Bankruptcy automatically stops all debt collection action against you, including phone calls from creditors or debt collectors, lawsuits, wage and bank account garnishments. Mortgage foreclosure actions are also stopped, although only temporarily. (A more permanent remedy for a mortgage foreclosure is provided by Chapter 13.) Unsecured debts such as credit cards and medical bills are usually discharged in full, meaning the creditors can never come back and try to collect from you in the future.
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Bankruptcy Option #2: Chapter 13 (Reorganization)
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A Chapter 13 Bankruptcy filing may be appropriate for you if you are in any of the following circumstances:
- You are facing foreclosure on your home and wish to stop the foreclosure and bring your mortgage payment current; or
- You have too much disposable income to qualify for Chapter 7 and you wish to reorganize your debts instead of seeking a complete discharge under Chapter 7; or
- You need the protection from creditors which a bankruptcy filing provides but you have non-exempt assets which you would be required to surrender under Chapter 7; or
- You have already filed a Chapter 7 Bankruptcy within the last six years and you are therefore not eligible to file under Chapter 7 again at this time.
There may be additional reasons for choosing Chapter 13 over Chapter 7 when considering which type of bankruptcy may be most appropriate for you. These reasons will be discussed at your free initial consultation when we are fully aware of your particular debts and circumstances.
You Keep All of Your Assets: Chapter 13 allows you to keep all of your assets, regardless of whether or not these assets would be considered exempt under Chapter 7. In exchange, you agree to pay your unsecured creditors -out of your future income -the same amount they would have received if you had liquidated your non- exempt assets under Chapter 7. All outstanding unsecured debt is wiped out at the conclusion of your plan.
The Plan: Chapter 13 Bankruptcy involves preparing and submitting to the court for approval a plan for dealing with your debts. We prepare the plan for you after consulting with you. Basically, the plan provides for payment of on-going secured debts (such as mortgages and auto loans) and also of priority debts (such as taxes and court fines). Your remaining unsecured debts (such as credit cards and medical bills) are included in the plan also but these creditors usually receive little or nothing in the way of repayment. At the conclusion of your plan, all debts are usually either paid in full (except for on going mortgage payments) or wiped out (discharged).
Time: A Chapter 13 Bankruptcy repayment plan usually lasts from three years (at a minimum) to five years (at a maximum). The length of your specific plan would depend upon your individual circumstances. If you decide to discontinue your Chapter 13 bankruptcy plan for any reason, you may have your case dismissed by the court at any time or if you qualify converted to a Chapter 7.
If you have additional questions, please call Greg Dunn at (808) 524-4529 for your free consultation.
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Frequently Asked Questions
What is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by Federal law and most bankruptcy cases are handled in Federal Court. Filing bankruptcy immediately stops most of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to law.
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start.
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on late payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without returning the property or collateral.)
- Prevent repossession of a car or other property.
- Stop wage garnishment debt collection, harassing phone calls, and other similar creditor actions to collect a debt.
- Restore or prevent termination of utility service. (Gas, water, etc.)
What Bankruptcy Cannot Do
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of "secured" creditors. A "secured” creditor is a creditor who has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors (Chapter 13 Bankruptcy) to take payments over time in the bankruptcy process. Bankruptcy can eliminate your obligation to pay any additional money if your property is surrendered. Generally, you cannot keep the collateral unless you continue to pay the debt.
- Discharge types of debts singled out by federal law for special treatment, such as child support, alimony, student loans, court restitution orders, criminal fines, and some taxes.
- Discharge debts that happen after the bankruptcy has been filed.
What will happen to my home and car if I file bankruptcy?
In most cases, you will be able to keep your home and car as long as your equity in the property is exempt and all your payments are current.
However, some of your creditors may have a "security interest" in your home, auto, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you do not make your payments on that debt, the creditor may be able to sell the home or property during or after the bankruptcy. In order to keep the collateral, you can agree to keep making payments on the debt until it is paid or you can force the creditor to accept the amount that the property is worth in a Chapter 13 Bankruptcy only; however, the creditor must agree to accept the value of the collateral or property in a Chapter 7 Bankruptcy.
What different types of bankruptcy chapters should I consider as a couple or individual?
Chapter 7 is known as a "straight" or "full" Bankruptcy. In a Chapter 7, your attorney files a petition asking the court to discharge your debts. The entire Chapter 7 process takes approximately four to six months. The basic idea in a Chapter 7 is to wipe out (discharge) your debts in exchange for you giving up your property, except for "exempt" property. In most cases all of your property will be exempt.
The amount of the above exemptions are doubled when a married couple file together, except for the real property exemption.
I listed my household goods as collateral, can I keep them?
A Motion can be filed in court to remove the lien from exempt household goods. This would allow you to keep these items. However, this would not include luxury items such as exercise equipment, sporting goods, guns, camping equipment, etc.
Can I own anything after bankruptcy?
Yes!! Many people believe they cannot own anything for a period of time after filing bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
Will bankruptcy wipe out all my debts?
Yes, with some exceptions. Bankruptcy will not normally discharge:
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Money owed for child support or alimony.
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Debts not listed on your petition with certain exceptions.
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Loans you incurred by knowingly giving false information to a creditor, who reasonably relied on it in making the loan.
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Debts resulting from "willful and malicious" harm.
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Fraudulent use of credit cards.
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Injuries and damages resulting from drunk driving.
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Taxes less than three years old.
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Most student loans.
Will bankruptcy affect my credit?
Bankruptcy may appear on your credit report for seven to ten years. Thus, filing a bankruptcy may affect your ability to obtain credit in the future. If you are already behind on your bills your credit may already be bad. Bankruptcy will probably not make things much worse. Since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills and you may be able to get new credit. Greg Dunn may also assist you in repairing your three credit reports --- Transunion, Equifax and Experian after you have completed your bankruptcy.
How can I afford bankruptcy when I don’t have money to pay my debts?
Greg Dunn offers his clients a payment plan. You may put down an initial partial payment and Greg will start dealing with your creditors, and in most cases you stop paying your debts you plan to wipe out.
REMEMBER: EACH CASE IS DIFFERENT. THE INFORMATION PROVIDED HERE IS MEANT TO GIVE YOU GENERAL INFORMATION, NOT SPECIFIC LEGAL ADVICE. FOR MORE INFORMATION, CALL GREG DUNN AT (808) 524-4529.
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