What are the Hawaii Bankruptcy Exemptions?

Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool


In a Nutshell

Bankruptcy exemptions can vary from state to state as each state has its own exemption laws. States can also decide whether or not to allow the federal bankruptcy exemptions, which can be found in the United States Bankruptcy Code, as an alternative option to its residents. A minority of states allow a choice between state exemptions and federal exemptions, and Hawaii is on that list. This means that anyone filing bankruptcy in Hawaii can choose to use the state exemptions or the federal ones, depending on whichever suits them best. Please note that while you can choose between exemption sets, you can’t pick and choose for individual items. Whichever set you choose will be the only one that you can apply in your case. If you do decide to use Hawaii bankruptcy exemptions you can also supplement them with the federal nonbankruptcy exemptions if any are applicable.

Written by Attorney Eva Bacevice.  
Updated July 28, 2020


What are the Hawaii bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

Deciding whether or not to file bankruptcy involves a lot of different factors. One item that many people wonder at the beginning is whether or not they’ll be able to hold on to their property. This is a reasonable concern as the basic premise of both Chapter 7 bankruptcy and Chapter 13 bankruptcy is that the filer (or debtor) should turn over his or her property to the bankruptcy estate so that the bankruptcy trustee can sell and distribute the proceeds fairly among unsecured creditors, like credit card companies. Keep in mind, however, that an important purpose of bankruptcy relief is to give the filer a fresh start by getting rid of their debts. It’d be really hard to start fresh if you’re starting from nothing. That’s why bankruptcy laws include exemptions, which allow debtors to protect different types of property up to varying amounts so that they can maintain a basic standard of living. The idea is to maintain a reasonable balance. Exemptions won’t extend to things like investment properties or luxury items, so you can expect to turn over any nonexempt property in a bankruptcy. 

Does Hawaii allow the use of federal bankruptcy exemptions?

Bankruptcy exemptions can vary from state to state as each state has its own exemption laws. States can also decide whether or not to allow the federal bankruptcy exemptions, which can be found in the United States Bankruptcy Code, as an alternative option to its residents. A minority of states allow a choice between state exemptions and federal exemptions, and Hawaii is on that list. This means that anyone filing bankruptcy in Hawaii can choose to use the state exemptions or the federal ones, depending on whichever suits them best. Please note that while you can choose between exemption sets, you can’t pick and choose for individual items. Whichever set you choose will be the only one that you can apply in your case. If you do decide to use Hawaii bankruptcy exemptions you can also supplement them with the federal nonbankruptcy exemptions if any are applicable. 

If you are a recent transplant to Hawaii, however, this will look a little different. There is a two-year residency requirement to be able to use a state’s exemptions. This is referred to as the 730-day rule. If you haven’t lived in Hawaii long enough for this to apply, you’ll need to look back to the six-month period before two years before your filing date to determine which state’s exemption rules apply. If you found that confusing, you’re not alone. To simplify, you are looking back to determine where you lived for the majority of the six months (the 180-day rule) beginning two and a half years ago. 

Hawaii Bankruptcy Exemptions

Real Property - the Hawaii Homestead Exemption

The Hawaii homestead exemption allows filers to protect the equity in their home, which is limited to no more than one acre of property. The exemption amount differs whether you are considered the head of the family, in which case you can protect up to $30,000 of equity; if not, you're limited to only protecting up to $20,000 of equity. Head of family is defined as meeting the IRS standard for the head of household or as residing in the real property and caring for a direct relative (for example, a child, parent, sibling, or grandchild.) (Haw. Rev. Stat. § 651-91, 92) Married couples filing jointly in Hawaii can’t double the homestead exemption, but if the property is held by the entirety, the non-filing spouse is exempt from claims of creditors. Filers in Hawaii can also exempt sale proceeds for up to six months following a sale. (Haw. Rev. Stat. § 651-96)

In contrast, the federal exemptions offer a homestead exemption of $25,150 in real property, which includes mobile homes and co-ops, or burial plots. Additionally, any unused portion of the homestead exemption up to $12,575 can be used for other property. Under the federal homestead exemption, married couples filing jointly can double this amount. 

Personal Property Exemptions

Hawaii also offers bankruptcy exemptions for your personal property of varying amounts.

Hawaii bankruptcy filers can protect up to $2,575 of equity in one motor vehicle. (Haw. Rev. Stat. § 651-121) Under federal exemptions, a Hawaii filer could protect up to $4,000 equity in a motor vehicle. Equity is the value of the car minus the balance left on your car loan. 

Additionally, under Hawaii state exemptions you can protect your household furnishings, appliances, books, and clothing used by you and your family; jewelry and watches up to a total of $1,000 in value. (Haw. Rev. Stat. § 651-121 (1)) Federal exemptions protect household goods, clothing, animals, crops, appliances and furnishings, books, and musical instruments up to $625 per item, and up to $13,400 in total.

Hawaii filers can also protect a burial plot, up to 250 square feet, and all improvements and gravestones upon it under the state exemptions. (Haw. Rev. Stat. § 651-121) There is no specific burial plot exemption under the federal bankruptcy exemptions. 

Miscellaneous Personal Property Exemptions

Hawaii bankruptcy filers using the state exemptions have special protection available for tools of the trade. Tools, instruments, uniforms, books, equipment, one commercial fishing boat and nets, one motor vehicle, and any other personal property ordinarily and reasonably necessary to your business, trade, or profession, are protected in full. (Haw. Rev. Stat. § 651-121) There is no similar provision available under the federal exemptions.

Hawaii bankruptcy exemptions also protect the property of business partnership without limit. (Haw. Rev. Stat. § 23-425-125)

It’s worth noting, however, that Hawaii state exemptions do not offer any wildcard exemption. Wildcard refers to an extra dollar amount that you can apply to any personal property beyond what is explicitly listed in the exemptions if you hope to protect it while in your bankruptcy. The federal exemptions offer a fairly generous wildcard exemption of $1,325, plus the unused portion of homestead exemption up to $12,575 to exempt property of any kind.

Money Benefits

Beyond tangible personal property, there are certain forms of benefits or payments that you are entitled to maintain during your bankruptcy. Hawaii state exemptions protect your unpaid wages due for services from the past 31 days. (Haw. Rev. Stat. § 651-121)

Hawaii state exemptions also offer protection for the following insurance benefits and proceeds without limit:

  • Accident, health, or sickness benefits (Haw. Rev. Stat. § 431:10-231 

  • Annuity contract or endowment policy proceeds wherein the beneficiary is the insured's spouse, child, or parent (Haw. Rev. Stat. § 431:10-232 (b))

  • Fraternal benefit society benefits (Haw. Rev. Stat. § 24-432)

  • Group life insurance proceeds (Haw. Rev. Stat. § 431:10-233)

  • Life insurance proceeds if the text of the policy prohibits proceeds from being used to pay the beneficiary's creditors (Haw. Rev. Stat. § 431:10D-112)

  • Life or health insurance policy for spouse or child (Haw. Rev. Stat. § 431:10-234)

Under the federal exemptions you can protect the following insurance benefits or proceeds up to the amount stated or in full: 

  • Life insurance payments from a policy for the person you depended on, needed for support 

  • Life insurance policy loan value, in accrued dividends or interest, to $13,400 

  • Unmatured life insurance contract, except credit insurance policy. 

Other Hawaii Exemptions

In addition to the above items that are protected specifically within the context of a bankruptcy, some provisions protect your property from creditors regardless of whether you happen to be in a bankruptcy or not. These protections exist under both Hawaii laws and federal statutes. Under Hawaii state laws the following public benefits are protected to the amount stated or in full:

  • Public assistance paid by Dept. of Health Services for work done in-home or workshop (Haw. Rev. Stat. § 20-346-33)

  • Disability benefits (Haw. Rev. Stat. § 24-431:10-231)

  • Unemployment compensation (Haw. Rev. Stat. § 21-383-163) 

  • Unemployment work relief funds to $60 per month (Haw. Rev. Stat. § 36-653-4)

  • Workers' compensation (Haw. Rev. Stat. § 21-386-57)

Similarly, under federal exemptions, the following public benefits are protected in full: public assistance, social security, veteran’s benefits, and unemployment compensation. Again, this is both within the context of a bankruptcy case or not.

Hawaii laws also protect pensions and retirement accounts in full as follows: 

  • IRAs and ERISA-qualified retirement accounts (Haw. Rev. Stat. § 651-124)

  • Firefighters’ pensions (Haw. Rev. Stat. § 88-169)

  • Police officers’ pensions (Haw. Rev. Stat. § 88-169) 

  • Public officers’ & employees' pensions (Haw. Rev. Stat. §§ 88-91 and 653-3).

Federal exemptions, by contrast, protect all types of retirement plan funds and accounts that are  tax-exempt under IRC section 401, 403, 408, 408A, 414, 457, or 501(a) in full. Federal laws limit IRAs & Roth IRAs to $1,362,800 (excluding rollover contributions), but this limitation could be lifted by a judge in the bankruptcy court.

Filing Chapter 7 Bankruptcy? 

There are many factors to consider when you’re thinking about filing for Chapter 7 bankruptcy. It can be very helpful to meet with a Hawaii bankruptcy attorney to talk through your options. The good news is that most bankruptcy lawyers offer a free initial consultation, which can help you get legal advice on whether Chapter 7 bankruptcy is the best debt relief for you, as well as the pros and cons of choosing either the Hawaii state or federal exemptions. A Hawaii bankruptcy attorney can also speak with you about your financial circumstances and advise you if Chapter 13 bankruptcy might be a better option for you. If it’s clear that you’ll be moving forward with Chapter 7 and you can’t afford to pay an attorney to assist you through the process, there are still resources available to help. You can check to see if you qualify for Upsolve’s free web app by checking this screening tool. If that’s the case then Upsolve can partner with you through the process to help you get to a successful discharge and a fresh start. 



Written By:

Attorney Eva Bacevice

LinkedIn

Eva G. Bacevice graduated from the University of Michigan Law School in 2001. She practiced law for close to a decade in the area of consumer bankruptcy. She now works in higher education as an Academic Advisor for undergraduate students at the Stephen M. Ross School of Business,... read more about Attorney Eva Bacevice

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener or read our bankruptcy F.A.Q. to see if Upsolve is right for you.

Take Screener
5,407 families have filed with Upsolve! ☆
or

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Bankruptcy Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →

Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can’t access their basic rights when they can’t afford to pay for help. Combining direct services and advocacy, we’re fighting this injustice.

To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.

Close

Considering Bankruptcy?

Try our 100% free tool that thousands of low-income families across the country have used to file bankruptcy themselves. We are funded by Harvard University, will never ask you for a credit card, and you can stop at any time.

File Bankruptcy for Free