Frequently Asked Questions on Bankruptcy
What is bankruptcy?
Filing bankruptcy is a legal procedure that allows you to eliminate debts completely or repay a portion of your debts based on what the law considers your ability to repay them. The difference depends on the type of bankruptcy filed.
What types of bankruptcy are there?
Primarily as it relates to typical individuals and small businesses in Hawaii, there are two chapters of the bankruptcy code: Chapter 7 – liquidation of your debts, and Chapter13 -formulating a plan to repay your debts over 3 to 5 years.
How much debt is enough to file for bankruptcy?
Some people file with debts in the six figures and some file with owing less than $10,000. It all depends on the individual circumstances. $10,000 is a lot of debt to a lot of people, especially when their wages are about to be garnished (taking 25% of your net pay), or bank accounts levied upon, and/or other property on the verge of being seized by creditors.
How does bankruptcy work?
You file various truthful and accurate schedules with the bankruptcy court informing the judge, trustees, and your creditors about your property, debts, income/living expenses and a little about your past. Then you must attend a mandatory hearing (simple, non-threatening, nonjudgmental), whereby an assigned trustee and creditors appear to ask you questions about the paperwork you’ve supplied. This creditors hearing, it’s called, sounds more intimidating than it actually is, because your attorney is with you and the creditors rarely appear.
In a Chapter 7, you typically are waiting for a few more months and your case is over and your debts erased. No assets lost, no objections from anyone 95% of the time.
In a Chapter 13, you have a repayment plan which you will honor for 3 to 5 years, and then your debts will be erased. As well, no assets ever lost in a Chapter 13, and we will handle any objections that would be lodged against you or your plan.
Will I have to go to court?
It is very rare in a bankruptcy that our clients ever have to go to court and meet the judge. We do everything in the beginning to try to prevent that from happening. But, when it does, rest assured we are there by your side and all our attorneys are very experienced and competent litigators in the bankruptcy court.
How long does a bankruptcy take to file?
If our clients do their thing timely and thoroughly, and we do ours, then we can have your case filed in a matter of days. If you have an emergency, and need to file immediately due to aggressive creditor actions, then we can file your case typically the same day we first meet with you.
How long does it take to recover my credit after I file bankruptcy?
The bankruptcy is on your credit report for 7 to 10 years, depending on the Chapter you file. In the huge majority of cases, this does not mean you won’t get credit again in 7 to 10 years. Your credit score will rebound actually much more quickly than you think. This is a major misnomer about filing bankruptcy.
That being said, we offer our clients, unlike any other bankruptcy law firm in Honolulu or Maui our special credit rebuild program- “7 steps to a 720 Credit Rating.” This is a free service offered to our clients and entails you receiving 2 months of weekly homework items instructing you how to rebuild your credit quickly and efficiently. If you follow the program closely, most of our clients are obtaining a 720 credit score in one to two years after filing bankruptcy.
Can tax debt ever be discharged?
Yes, we do it all the time and consider ourselves one the most versed bankruptcy law firms in Hawaii at discharging tax debts in bankruptcy. There are a few rules that need to line up, and it can sound complicated to the lay person, but tax debts, especially older than 3 years, are not really a big problem to eliminate.
Can lawsuit judgments be discharged?
Yes, they can. This is probably the most common reason people file for bankruptcy. They are pending law suits and judgements facing them or already on their records.
Can I keep my car if I file for bankruptcy?
Yes. I can almost say emphatically that in bankruptcy, if want to keep your car and can pay for it, then you always keep it.
Can I keep my home if I file for bankruptcy?
Yes. In fact, our clients never lose their homes unless they chose to. There are valuations and equity considerations to bare in mind, but if you have a valuable house, you just need the proper guidance and bankruptcy Chapter to eliminate your debts and not lose your house.
Do I need a lawyer to file for bankruptcy in Hawaii?
You can file a bankruptcy without a lawyer in Hawaii. Like almost any proceeding in court you can represent yourself—in your own criminal trial, your own divorce, can make your own will, etc. However, the bankruptcy code is very complicated. So complicated that it has it’s own court and own judges that handle only bankruptcy cases. So, I ask you. Would you like to sew your own parachute? Use homemade fire alarms? Perform brain surgery on yourself?