How is bankruptcy different in Hawaii than other states? And how is recovering from bankruptcy different in Hawaii than the mainland?
Bankruptcy in Hawaii
Bankruptcy allows petitioners the choice of filing for bankruptcy using exemptions under the state bankruptcy code or federal bankruptcy code. This gives debtors a chance to compare their assets and obligations against the exemptions and protections of each code and choose the bankruptcy filing that is best for them.
Rules for the First Months After Bankruptcy
Hawaii allows debtors to keep their exempt property after bankruptcy. When the bankruptcy has been discharged, the money that you earn is yours to keep less obligations like taxes, alimony and child support. However, if you receive money in the form of a property settlement, an inheritance or life insurance payout within 180 days of filing, this money could be garnished to pay off your debts. Disability payments, group life insurance and annuities are not affected.
Life after Bankruptcy
The 1099-C form is a tax form that shows the debts that have been forgiven through bankruptcy. The 1099-A is generated when someone goes through foreclosure. Talk to your bankruptcy attorney to avoid taxes on 1099 income statements for debt that was discharged in bankruptcy.
It is certainly possible to get a credit card when recovering from bankruptcy. You may also switch to a debit card, and watch your spending. Do not rush out to get a new credit card with an obscene interest rate and expect to improve your credit score. Paying utility bills, your house payment or rent and obligations like student loans will do more to raise your credit score than a credit card that starts with a 20% interest rate that rises to 40% after a missed payment. If you discover that exempt property was seized and sold after the bankruptcy, contact an attorney. When exempt property is wrongly sold, you can sue for its value, damages and your legal fees.
Be careful to pay your property taxes and income taxes on time and in full. While Hawaii does have a $30,000 homestead exemption for heads of household and those over 65 and a $20,000 homestead exemption for everyone else, liens can be placed against the property you kept through bankruptcy if you fail to pay your taxes.