Chapter 7 Bankruptcy vs. Chapter 13: Which Is Right for You in Hawaii?
Choosing between Chapter 7 bankruptcy and Chapter 13 is one of the most important financial decisions a Hawaii resident can make. Both offer legal protection from creditors and a route to debt relief, but they work very differently. Here is what you need to know.
Quick Comparison: Chapter 7 vs. Chapter 13 in Hawaii
- Timeline: Chapter 7 typically takes 3 to 6 months, while Chapter 13 runs on a repayment plan of 3 to 5 years.
- Income requirement: Chapter 7 requires passing the means test; Chapter 13 requires a regular income.
- Unsecured debt: Chapter 7 can fully discharge it, while Chapter 13 pays it partially through a plan.
- Home in foreclosure: Chapter 7 does not stop foreclosure long-term, but Chapter 13 can halt foreclosure and cure arrears.
- Asset risk: Under Chapter 7, non-exempt assets may be liquidated, whereas Chapter 13 generally lets you keep your assets.
- Prior filing limit: Chapter 7 cannot be refiled within 8 years, while Chapter 13 is available sooner after a prior Chapter 7.
Who Qualifies for Each Chapter in Hawaii?
Chapter 7 bankruptcy requires passing the Hawaii means test, which compares your income to the state median. Hawaii's high cost of living, including housing, food, and utilities in Honolulu, affects how the test calculates your disposable income.
If your income is too high for Chapter 7, Chapter 13 may still be an option. It requires a regular income to fund a multi-year repayment plan. You also cannot file Chapter 7 if you filed a prior Chapter 7 case within the last eight years.
Both chapters are handled through the U.S. Bankruptcy Court for the District of Hawaii, which covers all islands including Oahu, Maui, Kauai, and the Big Island.
What Debts Can Each Chapter Discharge?
Chapter 7 bankruptcy can eliminate most unsecured debts, including credit card balances, medical bills, and personal loans. Student loans, child support, alimony, and most tax debts cannot be discharged under either chapter. Chapter 13 can discharge a slightly broader range of debts upon successful completion of the repayment plan.
Which Chapter Protects Your Home in Hawaii?
Chapter 13 is typically the stronger tool when your home is at risk. Filing triggers an automatic stay that stops a foreclosure immediately, and the repayment plan lets you catch up on missed mortgage payments over 3 to 5 years. Hawaii's real estate values make homeownership especially worth protecting in Honolulu neighborhoods like Kaimuki, Manoa, and Pearl City.
Chapter 7 bankruptcy also triggers an automatic stay but does not provide a mechanism to cure mortgage arrears. If you are current on your mortgage and your main concern is unsecured debt, Chapter 7 may be the faster solution.
Key Questions to Ask Before Filing
- Do you have a regular income to support a multi-year plan?
- Are you behind on your mortgage and trying to keep your home?
- Do you pass Hawaii's means test for Chapter 7?
- Have you filed bankruptcy within the past 8 years?
Explore your
bankruptcy options to learn how each chapter may apply to your situation.
Take the Next Step With a Free Consultation
Greg Dunn Bankruptcy and Debt Relief Attorney, serving Honolulu, HI, and all of Hawaii, offers a free initial consultation seven days a week with no office visit required.
Contact us today or call
(808) 524-4529 to schedule your free consultation. Learn more about
Greg Dunn Bankruptcy and Debt Relief Attorney and start your path to financial recovery.
