- A means test will be conducted to determine if you should file for Chapter 7 or Chapter 13 bankruptcy. The means test compares your family income to the median family income in Hawaii. The median family incomes for Hawaii, as of 2008, were: two-person family, $67,199; three-person family, $77,529; four-person family, $91,483; five-person family, $86,463; six-person family, $89,544; and seven-or-more-person family, $117,593. If your family income is less than the Hawaii median, then you can file for Chapter 7.
- If your family income is above the Hawaii median, the court will look at your disposable income to determine if you can file for Chapter 7 or if you should file for Chapter 13. If, after deducting your monthly expenses from your monthly income, you have less than $100 left over, you can file for Chapter 7. If, after deducting your monthly expenses from your monthly income, you have more than $100 left over, but the money left over would not be enough to pay down at least 25 percent of your debts over a five-year period, then you can still file for Chapter 7.
- To begin your Chapter 7 case, you must file your petition, a schedule of assets and liabilities, a statement of financial affairs, as well as pay a filing fee. After you have filed, collection agencies, credit card companies, the bank and finance companies must stop their attempts to collect on your debts. Your property will now become property of the bankruptcy estate, and your trustee will decide how to distribute that property. In a Chapter 7 bankruptcy case, your non-exempt property will be sold to pay off creditors. Your non-exempt property is the property not listed as exemptions. An example would be an expensive watch.
- If none of your creditors has objected to your exemptions, the bankruptcy trustee will exclude your exempt property from the property of the bankruptcy estate. The trustee will sell non-exempt property to raise money to repay your creditors, and you will get to keep all exempt property.
- Hawaii allows its residents to exempt the following property: a homestead up to $30,000 if head of household or if over 65, otherwise a homestead up to $20,000 where the property cannot exceed one acre; a motor vehicle up to $2,575; clothes; household appliances and furnishings; books; jewelry up to $1,000; proceeds from the sale of damaged exempt property; a burial plot up to 250 square feet, tombstones, monuments and fencing; prisoner's wages; unpaid wages of the past 31 days; pensions; public benefits; tools of your trade; and insurance. Variables, such as Hawaii's median income and Hawaii state exemptions, may change in the future, so you should always consult your state's laws before filing your bankruptcy petition.
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