Get Out Of Debt

Chapter 7 is a ‘liquidation’ of nonexempt assets to pay debts. In an orderly, court-supervised procedure, a court appointed trustee liquidates the non-exempt assets of the debtor’s estate and makes distributions to creditors. In Chapter 7, the debtor selects property he/she is eligible to keep from either a list of state exemptions or exemptions provided in the Federal Bankruptcy Code. Although the debtor files a schedule C form for property claimed as exempt, the property is not exempt until the trustee files the property exemption report which actually divides the property as exempt or non-exempt.

Although state exemption laws are different from state to state, these states typically allow the debtor to keep these types of property: The debtor can exempt Up to $17,425 of equity in the home (homestead exemption). Some states have no homestead exemption; some allow debtors to protect all or most of the equity in their home. The debtor may be able to keep jewelry only worth up to $1,000, a vehicle with more than $2,400 of equity. The debtor is allowed to keep the cash value of Insurance policies. Pensions under the Employee Retirement Income Security Act (ERISA) are fully exempted in bankruptcy. Not only all public benefits, such as welfare, social security, and unemployment insurance but also tools used on job and at least 75% of wages are fully protected.

To get exemption the debtor must file the bankruptcy case in the state he/she lived in for the 730 days (2 years) before filing; or the state where he/she lived the majority of the 180 period preceding the 2-year period. Federal exemptions are retirement benefits (veteran’s benefits etc.), survivor’s benefits (judicial center director’s benefits, lighthouse worker’s benefits etc.), death disability benefits (injury compensations etc.) and miscellaneous (military group insurance etc.). One must note that federal exemptions are not available for all states.

The Bankruptcy Code allows the debtor to keep certain exempt property; but a trustee will liquidate the debtor’s remaining assets.

The declaration of bankruptcy allows debtors to solve significant financial debts after their non-exempt assets are distributed. Bankruptcy in the United States falls under Federal jurisdiction by the United States Constitution (Article 1, Section 8).

However, bankruptcy is implemented as statute law, and relevant statutes are incorporated within Bankruptcy Code of Title 11 of the United States Code. At present, two forms of filing bankruptcy are available to individuals: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a liquidation of assets, while Chapter 13 involves a reorganization by which the debtor creates a three- to five-year payment plan.

Although bankruptcy cases are filed in the United States Bankruptcy Court, they are often highly dependent upon state laws. Hawaii is one of the thirteen states in the U.S. that offers a choice between federal and state bankruptcy laws.

Hawaii bankruptcy laws provide exemptions that save a part of the properties from bankruptcy. Details of the exempted property are provided in the Hawaii bankruptcy chart. When bankruptcy is filed in Hawaii, an individual gets federal exemption in addition to Hawaii exemptions. According to Hawaii bankruptcy laws, an exemption limit applies to any equity in property secured by loans. Properties included in the Hawaii exemption chart are homestead (up to $30,000 for senior citizens and $20,000 for others), all insurances, property of business partnerships, pensions, personal property such as appliances, books, burial plots, clothes, jewelry to $1,000, and motor vehicles to $2,575, public benefits, tools of trade, and wages to minimum of 80%. No wildcard exemptions are given in Hawaii.

In Hawaii bankruptcy law, Chapter 7 filing has advantages such as a complete fresh start, immediate protection, lack of a minimum limit on the debt, and quick discharge of the case. The advantages of a Hawaii Chapter 13 payment plan are that it enables a person to keep his property, has more dischargeable debts, gives more payment time, and separates creditors by class. Major changes in the new act effective October 17, 2005, include a means test, proof of income, state exemptions, counseling, and child support.

Declaring bankruptcy is an important decision and quite complicated in its implementation. Hiring an attorney with experience in the field concerned is generally recommended.

Bankruptcy FAQ

How much will Bellevue bankruptcy cost me?
Bankruptcy cases generally cost about $1000 and $2000 for a Chapter 7. While this is a good estimate, prices will differ depending on your situation and the type of bankruptcy that you file. A Chapter 13 is much more expensive because it take much more time and work.

Will I lose everything?
No you will not. Depending on the type of bankruptcy you file under, you may not lose anything at all. If you file Chapter 13 the bankruptcy court does not require you to give up any assets. In a Chapter 7 the bankruptcy court will require you to give up any non-exempt assets, but with the help of a bankruptcy attorney most people who file bankruptcy must not give up any assets.

Will my creditors leave me alone?
They certainly will. Once you submit your bankruptcy petition, your creditors will no longer be allowed to try to get money from you. This happens because the bankruptcy court will send an automatic stay to all your creditor on your behalf. This automatic stay legally prohibits them from trying to contact you at all.

How will bankruptcy affect my credit score?
A bankruptcy can remain on your credit report for 10 years after you file bankruptcy. Most people are not approved for a mortgage loan for 2 – 3 years after they file bankruptcy. However, most people find that after 3 years the major effects of bankruptcy have greatly decreased.

What happens during bankruptcy?
Before filing bankruptcy, all debtors are required to complete a credit counseling course. This course can be completed in person, over the phone or online. Your attorney will help you sign up for it.

Your bankruptcy attorney will then help you get the necessary paperwork together so that your request is filed correctly with the bankruptcy court. Once you have filed, an automatic stay is put into place. This prohibits your creditors from contacting you anymore.

You will then prepare a list of all your assets and debts. Your assets will be divided into two groups, exempt and non-exempt. You will keep all your exempt assets and your attorney will protect your possessions by making them exempt. You will bring this list to a meeting with your creditors and a trustee appointed by the bankruptcy court. The trustee will take your non-exempt assets and sell them. The money raised will be payed to your creditors. The rest of your debt will be discharged.

All you have left to do is take a personal financial management course that can also be completed in person, by phone or online. After that you are living your new debt-free life!