July 24, 2017
Many people worry that they’ll have to give up everything that they own when they file for bankruptcy, but that’s not the case. Each state, including Hawaii, allows residents to protect (exempt) specific property in bankruptcy. Filers can find the type and amount of property that they can keep in Hawaii’s exemption laws.
The role that exemptions play depends on the bankruptcy chapter that you choose to file.
- Chapter 7 bankruptcy. In a Chapter 7 case, you don’t pay into a repayment plan. Instead, you get to keep all of your exempt property, and, if you have any nonexempt property, the official that manages your case (the bankruptcy trustee) will liquidate (sell) it and distribute the proceeds to creditors.
- Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, you can keep all of your property if you can afford to do so. You’ll have to pay for any nonexempt property that you retain in your three- to five-year repayment plan. If you aren’t able to afford to do so, you can arrange to sell it and list how you intend to use the proceeds to pay creditors in your repayment plan (the trustee doesn’t sell your property in this chapter).
In some states, including Hawaii, residents can choose between the state exemption scheme and the federal bankruptcy exemptions. However, you can’t mix and match between the two sets. If you select Hawaii’s exemptions, you can use the federal “nonbankruptcy” exemptions, as well. Also, spouses filing together (jointly) can double exemption amounts if the property belongs to both spouses.
Hawaii Property Exemptions
You can find the text of the exemption statutes in the Hawaii Revised Statutes (HRS) located on the State of Hawaii’s website.
- Homestead—$20,000 of equity in one piece of real property; $30,000 if the debtor (filer) is the head of household or 65 years of age or older; the same amounts apply to property sold within six months of the bankruptcy. (HRS §§ 651-92(a)(1),(2), 651-96.)
- Tenancy by the entirety—if you and your spouse hold real estate in this way, you might be able to exempt your equity. It can be complex, however, so you should speak with a knowledgeable bankruptcy attorney. (11 USC § 522(b)(3)(B).)
Wages and Support
- Prisoners’ earnings (HRS §§ 353-22, 353-30.)
- Earnings (wages, salary, or commission)—earned during the 31 days before filing for bankruptcy; other percentages might apply. (HRS §§ 651-121(6), 652-1.)
- Wages from unemployment relief fund—up to $60 per month. (HRS § 653-4.)
- One motor vehicle—$2,575. (HRS § 651-121(2).)
Tools of the Trade
- Tools of the trade—all property necessary in the debtor’s profession, including tools, uniforms, books, furniture, one vehicle, and one commercial fishing boat and nets. (HRS § 651-121(3).)
- Jewelry and watches—$1,000. (HRS § 651-121(1).)
Household Goods, Clothing, and Jewelry
- Household goods and furnishings, appliances, and clothing (HRS § 651-121(1).)
Retirement Accounts, Pensions, and Other Benefits
- State employee retirement, pension, and annuity benefits (HRS §§ 88-91, 653-3.)
- Police officer and firefighter pension benefits (HRS § 688-169.)
- Unemployment compensation benefits—other than child support. (HRS § 383-163.)
- Workers’ compensation (HRS § 386-57.)
- Temporary and permanent disability insurance benefits (HRS §§ 392-29, 431:10-231.)
- Pension, retirement, annuity, disability, and death benefits—exceptions apply. (HRS § 651-124.)
- Individual and group life insurance proceeds (HRS §§ 431:10-231, 232.)
- Fraternal benefit society benefits (HRS § 432:2-403.)
- Particular partnership property (HRS § 425-125.)
- Burial plot—up to 250 square feet. (HRS § 651-121(4).)
- Sales or insurance proceeds—received up to six months before the bankruptcy for any exempt property. (HRS § 651-121(5).)
It’s important to understand that exemptions change periodically. To be sure that you meet all necessary qualifications, verify exemptions or consult with a bankruptcy lawyer.
Questions for Your Attorney
- Is there a limit on how big my piece of real estate can be in Hawaii?
- Can I exempt real estate that isn’t my personal residence?
- Can I afford to keep all of my property if I file a Chapter 13 bankruptcy?