Chapter 13 Bankruptcy in Hawaiʻi: How the Repayment Plan Can Save Your Home, Car, and Future

By Martin Berger, Hawaiʻi Consumer Bankruptcy Attorney

Past President, Hawaiʻi Bankruptcy Bar Association | Former Adjunct Professor of Business Law, University of Hawaiʻi at Hilo | Over 20 Years Practicing in the U.S. Bankruptcy Court, District of Hawaiʻi

Last updated September 6, 2026 · Reviewed for legal accuracy by Martin Berger

Median-income figures verified current as of August 15, 2026.

Memberships & Recognition

Instead of erasing your debt all at once, Chapter 13 lets you reorganize what you owe and pay back what you can afford over three to five years. A federal injunction holds your creditors back from the day you file to the day you are discharged. For many Hawaiʻi families, it is the tool that saves a home from foreclosure, lowers a car payment, and gives them room to catch their breath.

The people who come to me about Chapter 13 are often doing everything right. They have steady income but fell behind after a hard stretch, and now a mortgage company, a car lender, or the tax office is threatening to take something they cannot afford to lose. Chapter 13 gives them a way to keep it.

I wrote this guide to answer the questions I hear most often, so you can make an informed decision based on facts, not fear.

Disclaimer: This guide is provided for informational and educational purposes only. It does not constitute legal advice and does not establish an attorney-client relationship. Bankruptcy law is highly fact-specific. For guidance on your specific situation, please contact my office. You can start with my free questionnaire or call (808) 468-7000.

Every effort has been made to ensure accuracy, but this guide may contain errors or omissions and is current only as of the date last updated above. The law changes frequently, so confirm any point with my office before relying on it.

Key Takeaways

• It is a repayment plan, not a wipeout. You make one monthly payment to a trustee for three to five years, and creditors are paid from it according to rules set by federal law.
• It can save your home. Chapter 13 lets you cure missed mortgage payments over the life of the plan, which stops foreclosure in a way Chapter 7 cannot.
• It can lower secured debt. You may be able to reduce a qualifying car loan to the value of the car, and strip off a second mortgage that is no longer backed by any home equity.
• It protects co-signers. The co-debtor stay shields the people who co-signed your consumer debts while your plan is active.
• It is for people who do not qualify for Chapter 7, or who have something to protect. Higher-income earners, people behind on a mortgage, and people with nondischargeable tax debt often belong in Chapter 13.
• Most unsecured debt is paid at a steep discount. Credit cards and medical bills are often paid only a few cents on the dollar, and the rest is discharged at the end.
• There are eligibility limits. You need regular income, and your debts must fall under the statutory ceilings.
• Credit recovery starts during the plan. Many clients see their score begin to climb while the plan is still running, and every client gets the 720 CreditScore program as part of my representation.

What Is Chapter 13 Bankruptcy in Hawaiʻi?

Chapter 13 bankruptcy in Hawaiʻi is a court-supervised repayment plan that lets people with regular income catch up on their debts over three to five years while keeping their property, such as a home or car. Rather than liquidating your property, you propose a plan to repay some or all of your debts out of your future earnings. People sometimes call it a "wage earner's plan."

One payment, one trustee. Each month you send a single payment to the Chapter 13 trustee. In the District of Hawaiʻi, the standing Chapter 13 trustee is Nima Ghazvini, whose office collects your payments and distributes them to your creditors under the terms of your confirmed plan. You do not negotiate with creditors one by one. The plan and the law do that for you.

The plan lasts three to five years. If your income is below the Hawaiʻi median, your plan generally runs three years. If it is at or above the median, it runs five. Five years is the maximum the court can approve.

The court process. Your case is filed in the U.S. Bankruptcy Court for the District of Hawaiʻi in Honolulu, which serves every island. Early in the case there is a confirmation hearing where the judge approves your plan. After that, as long as you make your payments and keep up with ongoing obligations, the case runs quietly in the background until you finish and receive your discharge.

Why people choose it. Chapter 13 is the right tool when you have something a Chapter 7 cannot protect, or when you do not qualify for Chapter 7 at all. The most common reasons are catching up on a mortgage to stop foreclosure, keeping property that exceeds your exemptions, handling tax debt that cannot be wiped out, or reorganizing because your income is too high to pass the Chapter 7 means test.

Chapter 13 vs. Chapter 7: Which Is Right?

Most people who come to me have heard of Chapter 7, the faster "clean slate" bankruptcy. The two chapters solve different problems. Chapter 7 erases dischargeable debt in a few months, and you keep only what your exemptions protect. Chapter 13 keeps your property and reorganizes your debt into a plan. Here is how they compare.

In plain terms: if your income is low enough and you do not need to save a house or other property, Chapter 7 is usually faster and cheaper. If you are behind on a mortgage or car you want to keep, owe taxes that cannot be wiped out, earn too much to pass the means test, or want to protect a co-signer, Chapter 13 is usually the answer. When I meet with you, my job is to figure out which one actually serves you, and there is no extra charge to have that conversation. My side-by-side guide to the two chapters goes deeper on how to choose.

Do You Qualify? Debt Limits and Income

Chapter 13 has two basic eligibility requirements: regular income and debts that fall under the statutory ceilings.

You Need Regular Income

"Regular income" is interpreted broadly. It does not have to be a paycheck. Self-employment income, commissions, Social Security, disability, pension, rental income, and even regular family support can all qualify, as long as it is stable and predictable enough to fund a plan. What the court needs to see is that you can reliably make a monthly payment.

The Debt Limits

To be eligible for Chapter 13, your debts must fall below limits set by 11 U.S.C. § 109(e). For cases filed between April 1, 2025, and March 31, 2028, the limits are:

You must be under both limits. These figures are adjusted for inflation every three years; the next adjustment takes effect April 1, 2028. Confirm the current figure before relying on it. If your debts exceed these ceilings, Chapter 11 may be an option instead.

Income and the Means Test

Unlike Chapter 7, a high income does not disqualify you from Chapter 13. But your income still matters, because it sets two parts of your plan: how long it must last, and how much of your disposable income unsecured creditors are entitled to receive.

I compare your average monthly income over the six months before filing, multiplied by twelve, against the Hawaiʻi median income for your household size. The median is simply the midpoint: half of comparable Hawaiʻi households earn more, and half earn less. If you are below the median, your plan runs three years. If you are at or above the median, your plan runs five years, and I calculate your disposable income using IRS-allowable expense standards to determine the minimum your unsecured creditors must receive. My means test guide works through the same calculation in detail.

Current Hawaiʻi Median Income Figures (Effective April 1, 2026)

Household size includes everyone who lives with you and shares income and expenses.

Source: U.S. Trustee Program / U.S. Census Bureau median family income figures for cases filed on or after April 1, 2026. These figures are updated twice a year, so confirm the current figure before relying on it.

The Automatic Stay and Co-Debtor Stay

The moment your Chapter 13 case is filed, the automatic stay takes effect. This is a federal injunction that stops creditors in their tracks. As soon as I file, the calls, lawsuits, and garnishments stop. It immediately halts:

• Foreclosure proceedings
• Vehicle repossessions
• Wage garnishments (other than for child support and alimony)
• Bank account levies
• Harassing collection calls
• Most pending lawsuits over money

The co-debtor stay: Chapter 13's extra shield. Chapter 13 offers something Chapter 7 does not. Under 11 U.S.C. § 1301, the co-debtor stay blocks creditors from chasing the people who co-signed your consumer debts while your plan is active. If someone co-signed your car loan or guaranteed a personal loan for you, this protects them too, as long as you keep the underlying debt current through your plan. This is often the deciding factor for clients whose main worry is dragging a co-signer down with them. Two limits to know: the shield lasts only while the case is open and the plan is paying the debt, and it pauses collection rather than erasing your co-signer's liability.

The stay has limits. It does not stop most criminal proceedings, and it does not stop the establishment or collection of domestic support obligations such as child support from income that is not part of your plan. If you have had a bankruptcy case dismissed within the past year, the protection can be much shorter or may not arrive at all, so tell me at the start if you have filed before.

How the Chapter 13 Plan Works

The heart of a Chapter 13 case is the plan. It is a written proposal, approved by the court, that says exactly how much you will pay each month and where that money goes. Your single monthly payment to the trustee is divided among your creditors in an order set by law and the terms of your plan.

Not every creditor is treated the same. The Bankruptcy Code sorts debts into tiers, and the higher tiers must be taken care of before the lower ones receive anything. Here is how your payment flows.

What this means for you. Your plan payment is built around what you must pay (priority debts and the arrears on property you are keeping) and what you can afford (your disposable income). Unsecured creditors like credit card companies are last in line. In many of my cases they receive only a small fraction of what they are owed, yet the balance is still wiped out when you complete the plan. The law guarantees them only one minimum: they must receive at least as much as they would have gotten if you had filed Chapter 7 and the trustee had liquidated your non-exempt property. This is called the "best interest of creditors" test.

You stay in control. Unlike Chapter 7, you have a broad right to dismiss your Chapter 13 case, as long as the case began as a Chapter 13, though a court can deny it if it finds bad faith. If your situation changes (your income drops, a home sale falls through, the plan stops making sense), we are not trapped: we can end the case and consider another path. That control is one of Chapter 13's quiet advantages.

Saving Your Home from Foreclosure

Curing a mortgage default is the most powerful tool Chapter 13 offers, and it is the reason most of my clients choose it. If you have fallen behind on your mortgage, Chapter 13 gives you a structured way to catch up that no other tool offers.

The problem with Chapter 7 and a mortgage. Chapter 7 stops a foreclosure for a short time, but it gives you no mechanism to repay the missed payments. The day your Chapter 7 case ends, the lender can resume foreclosure unless you have already cured the default. For someone behind on the mortgage, that is no solution at all.

How Chapter 13 fixes it. Under 11 U.S.C. § 1322(b)(5), you can spread your overdue mortgage payments (the "arrears") across the entire three to five year plan while you resume making your regular monthly mortgage payment going forward. Keeping up with both is what saves the house: the foreclosure stays on hold, and the plan is built to bring the loan current by its end. At the end of the plan there is a formal step to confirm with the lender that the mortgage is current, so the case closes with the loan where it should be. Condominium and association arrears can be cured through the plan the same way, beside the mortgage and the car.

Say you are $24,000 behind. Outside bankruptcy, the lender wants all of it now or it forecloses. Inside a five year Chapter 13, that $24,000 is paid off gradually through your plan, on top of your ongoing payment, and the foreclosure stays on hold the entire time. The exact cure amount comes from the lender's own filed claim rather than from an estimate, and if a creditor fails to file its claim, I file one for it so the plan pays what it should. For many families this is the difference between keeping their home and losing it.

Stripping a Second Mortgage or HELOC

If your home is worth less than what you owe on your first mortgage, a second mortgage or home equity line of credit (HELOC) may be completely unsecured, because there is no equity left to back it. In that situation, Chapter 13 may let you "strip off" the junior loan entirely.

Here is the rule. A mortgage secured only by your principal residence cannot be modified if it is even partially backed by equity. A mortgage on a rental or multi-unit property does not get that protection and can be modified, and neither does a home loan whose last payment comes due before the plan ends. But a junior mortgage backed by no equity at all is different: because nothing secures it, it can be treated as an unsecured debt, the lien stripped from your home, and the balance discharged along with your other unsecured debts.

The catch. This only works if the senior debt exceeds your home's value by enough that the junior lien is wholly unsecured. If even one dollar of equity reaches the second mortgage, it is protected and the lien survives. Valuation is everything here, and I review the value and the balances carefully before we rely on this strategy.

Your Car and the 910 Day Rule

Chapter 13 can sometimes lower a car payment through a process called a "cramdown." If you owe more on your car than it is worth, you may be able to pay the lender only the car's actual value, with the rest treated as unsecured debt, and often at a reduced interest rate set under the Till formula. In this district the court publishes a standard rate for these loans twice a year, and the plan uses the lower of that rate or your contract rate.

The 910 day rule decides whether you can. Under the so-called "hanging paragraph" of 11 U.S.C. § 1325(a), you cannot cram down a car loan if all three of these are true:

• The lender has a purchase-money security interest (it financed the car itself),
• You bought the car within 910 days (about two and a half years) before filing, and
• The car was for your personal use.

If your loan checks all three boxes, you must pay the full balance through the plan, though you may still be able to lower the interest rate. One exception: negative equity rolled in from a trade-in may still be reduced, even inside the 910 days. If you bought the car more than 910 days before filing, cramdown to the vehicle's value is on the table. A similar one year rule applies to other financed personal property.

If your car was just repossessed. If a lender has repossessed your car but has not yet sold it, filing Chapter 13 can often get it back. This is not guaranteed and timing is everything, so call me before the car is sold and we will decide quickly whether it can be recovered.

Debts Paid in Full vs. Debts Discharged

Chapter 13 sorts your debts into three groups: debts that must be paid in full, secured debts on property you keep, and general unsecured debts that are paid partially and then discharged.

Debts That Must Be Paid in Full Through the Plan

• Domestic support obligations. Child support and alimony arrears must be paid in full, and you must stay current on ongoing support.
• Recent income taxes. Priority tax debts (generally income taxes from the last three years, though a recent IRS assessment can make an older tax priority too) must be paid in full through the plan. Older taxes that have lost priority can be treated as general unsecured debt. My tax debt and bankruptcy guide explains which taxes keep priority.
• Other priority claims such as certain wages owed to employees if you ran a business.

Debts Discharged When You Complete the Plan

When you finish your plan, the court enters a discharge that wipes out the remaining balance on your dischargeable debts, including credit cards, medical bills, personal loans, and most older obligations, even though you only paid a fraction of them.

The Chapter 13 "superdischarge." A handful of debts that survive Chapter 7 can actually be discharged in Chapter 13. The most common example is non-support divorce debt, money a divorce decree orders one spouse to pay the other for reasons other than support (a true § 523(a)(15) debt), which is nondischargeable in Chapter 7 but can be wiped out in a completed Chapter 13. Willful and malicious damage to property can also be discharged in Chapter 13, though injuries to people cannot. The same advantage reaches condominium and association fees that come due after filing on a unit you are giving up: in a Chapter 7 they keep accruing for as long as your name is on the unit, while a completed Chapter 13 plan can erase them, which my association fees guide explains. These extra categories require completing the plan: a hardship discharge, which the court can grant when a plan fails for reasons beyond your control, does not include them. My divorce and bankruptcy guide covers the divorce side in detail.

Debts That Survive Chapter 13

• Domestic support obligations (paid through the plan, never discharged)
• Most student loans, unless you obtain an "undue hardship" determination under the Brunner test, which the Ninth Circuit still applies (see my student loan guide)
• Taxes for returns never filed or filed late, taxes connected to a fraudulent return, and trust fund taxes (payroll taxes withheld from employees)
• Debts from fraud, if the creditor challenges them in court during your case, and debts for death or personal injury caused by driving while intoxicated
• Criminal fines and criminal restitution

The Chapter 13 Process Step-by-Step

A Hawaiʻi Chapter 13 case moves through seven steps from intake to discharge.

1. Intake & Analysis. I do a full legal and financial analysis of your situation, confirm Chapter 13 is the right tool, and check that you are within the debt limits. You will also need your last four years of tax returns filed.
2. Credit Counseling Class. You complete a required credit counseling class (about 90 minutes) within the 180 days before filing.
3. Filing the Petition and Plan. I file your paperwork and your proposed plan. The automatic stay begins immediately, and you begin making plan payments to the trustee within 30 days, even before the plan is approved.
4. The 341 Meeting. About 30 to 45 days after filing, I attend a short meeting with you and the trustee, held by Zoom video, where you answer standard questions about your finances under oath.
5. The Confirmation Hearing. The judge reviews and approves ("confirms") your plan. I handle creditor and trustee objections and adjust the plan if needed to get it confirmed.
6. Living the Plan. For three to five years, you make one monthly payment to the trustee, who distributes it to creditors. You also complete a required debtor education class.
7. The Discharge. When you finish all your payments, you certify that your support obligations are current, the financial management course certificate is filed, and the court enters your discharge order, wiping out the remaining balance on your dischargeable debts. Your case then closes.

What Chapter 13 Costs

A Chapter 13 case has two cost components: the court's filing fee and the attorney's fee.

The court filing fee. The current filing fee for a Chapter 13 case is $313. The court can let you pay this in installments. Unlike Chapter 7, a full fee waiver is not available in Chapter 13, but the installment option keeps it manageable.

The attorney's fee. Depending on the case, I charge either the flat fee set by the court's fee guidelines for the District of Hawaiʻi (the "no-look" fee, which the court approves without itemized time records) or an hourly rate that the court reviews and approves. A Chapter 13 runs for years and often involves more work than a flat fee covers, so many of my cases are handled hourly. Certain specific tasks, such as a Motion to Determine Amount of Secured Claim (used to cram down a car loan), have their own set fees under the court's guidelines. I will explain at our first meeting which arrangement fits your case and what to expect.

You do not pay it all up front. In Chapter 13, court-approved attorney fees, flat or hourly, can be paid through your plan rather than before filing, and in most cases the majority of my fee is paid that way. That is what lets you get the automatic stay and stop a foreclosure or repossession without paying the whole fee first.

Credit Recovery After Chapter 13

A Chapter 13 filing generally stays on your credit report for seven years from the filing date, shorter than Chapter 7's ten. The federal Fair Credit Reporting Act permits up to ten years, but the credit bureaus' standard policy is to remove a completed Chapter 13 after seven. A case that is dismissed rather than completed can stay the full ten years the law permits. More importantly, the negative impact fades long before the entry disappears.

• Steady progress. Because you are making consistent, on-time payments for years, many clients see their score begin to climb during the plan, not just after it ends.
• Discharged balances. When the case closes, remaining balances drop to zero, improving your debt-to-income ratio.
• Buying a home. You can often qualify for an FHA or VA mortgage about one to two years into a Chapter 13 with the court's permission and an on-time payment history. Conventional financing typically becomes available a couple of years after discharge, provided you maintain steady income.
• A plan to rebuild. After your case is complete, I provide a structured credit-education and rebuilding program to help you raise your score as quickly as possible.

Frequently Asked Questions

About the Author

For more than twenty years I have represented people across Hawaiʻi in the U.S. Bankruptcy Court for the District of Hawaiʻi. Before moving to Oʻahu, I lived in Hilo for fifteen years, where I taught Business Law at the University of Hawaiʻi at Hilo and ran law offices in Hilo and Kona. I am a past president of the Hawaiʻi Bankruptcy Bar Association, and I concentrate my practice on bankruptcy and federal student loan discharge. I also negotiate debt settlements for people who want to avoid filing. Read more about Martin Berger ›

Reviewed and published by Martin Berger · September 6, 2026

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