Hawaiʻi Bankruptcy Exemptions: What You Keep When You File
This guide is legal information, not legal advice, and reading it does not create an attorney-client relationship. Every situation is different, and the right move in your case depends on your facts. For advice about your own situation, start with my free questionnaire or call me at (808) 468-7000.
I work hard to keep this page accurate, but errors or omissions are possible and the law can change. The information here is current only as of the date above.
Will I lose most of my property if I file bankruptcy in Hawaiʻi?
No. Hawaiʻi bankruptcy exemptions protect most of what a typical filer owns, and many people who file keep everything: the home, the car, the retirement account, and their everyday belongings. Losing property is the exception, not the rule, and a good part of my job is making sure your case is not one of the exceptions.
The fear I hear most is that filing means losing everything you own. Exemptions are the reason that fear is almost always wrong. In more than twenty years of Hawaiʻi cases, the ordinary result is that people keep their home, their car, their retirement, and their belongings, and walk away from the debt. This guide covers what the exemptions protect, how the two exemption systems work, and the timing rules that catch people. For the full dollar figures, I point you to the tables in my Chapter 7 guide as I go.
What an Exemption Actually Is
An exemption is a law that lets you keep a specific piece of property when you file bankruptcy. Your case is administered by the bankruptcy trustee, the official appointed to review your filing, whose job includes taking and selling any property that no exemption protects. In most cases, there is nothing for the trustee to take.
Those are called "no-asset" cases, and they are the norm. Everything the person owns is already covered by the exemptions, so the trustee takes nothing, sells nothing, and the case moves to discharge. An auction of your belongings is not what an ordinary Hawaiʻi case looks like.
Hawaiʻi or Federal: You Choose Your Exemption Set
Hawaiʻi is one of the states that lets you choose between two sets of exemptions, the federal set and the Hawaiʻi state set, and you have to pick one. You cannot take the best parts of each and combine them. Choosing the right set is one of the first questions I settle in every case.
For most of my clients, the federal set protects more. It includes a "wildcard," a pool of protection you can apply to anything you choose, including cash in the bank and a pending tax refund. The Hawaiʻi state set has no wildcard, so under the state system cash and a refund are largely exposed.
When I choose the Hawaiʻi set, it is usually to protect a married couple's home. The state election lets a married couple rely on Hawaiʻi's tenancy by the entirety protection, which I explain in the next section. For homeowners with real equity, that protection can matter more than anything the federal set offers.
For some clients, the Hawaiʻi set protects a livelihood. It covers the tools of your trade with no dollar limit, where the federal exemption for work tools is capped. The state protection reaches the tools your work actually requires, so it is about what the job needs rather than what the equipment cost. When someone's income depends on costly equipment, a fisherman's boat, a contractor's heavy vehicle, I have chosen the Hawaiʻi exemptions for exactly that reason. Hawaiʻi also protects workers' compensation benefits from creditors without a dollar limit.
The full amounts for both sets, side by side, are in the exemption tables on my Chapter 7 guide. Rather than repeat the numbers here, I keep them in one place so they stay current.
Will You Lose Your House?
You can usually keep your home in a Hawaiʻi bankruptcy. The starting point is the homestead exemption, which protects your equity, the part of the home's value beyond what you still owe. If you owe close to what the home is worth, there is little or no equity for the trustee to reach in the first place.
Property values here are high, and almost anyone who has owned a home here for a while has more equity than either exemption schedule covers on its own. That is why the two protections below do so much of the work.
In Hawaiʻi, married couples often have an additional, powerful layer of protection: tenancy by the entirety. It is not automatic. Tenancy by the entirety is created by your deed when you take title, and I see quite a few married couples who own their home as joint tenants instead and miss this protection without ever knowing they had a choice. If your deed does hold the home as tenants by the entirety, and you elect the Hawaiʻi exemption set, it is generally shielded from unsecured debts that either spouse owes alone, whether one of you files or you file together. It does not protect against debts you both owe, and a federal tax lien can still reach the property. I explain how title interacts with the exemptions in my Chapter 7 guide.
When the equity is larger than the exemptions and tenancy by the entirety does not fit your situation, losing the home is still not the usual answer. Chapter 13 exists for exactly this situation: a three to five year payment plan that lets you keep the home while you deal with the debt. Protecting home equity, along with stopping a foreclosure, is the biggest reason I file Chapter 13 cases.
Will You Lose Your Car?
You can usually keep your car in a Hawaiʻi bankruptcy, under either exemption set, as long as you keep up the payments and your equity is modest. A vehicle exemption protects a set amount of equity in your car. Most financed cars carry little equity, because the loan balance is close to the value, so they are safe.
To keep a car with a loan, you keep making the payments. Chapter 7 erases your personal liability on the loan, but the lender's lien on the car survives, so the payments continue if you want to keep it. The exemption amounts for vehicles are in the Chapter 7 tables.
Will You Lose Your Retirement?
Your retirement savings are protected in a Hawaiʻi bankruptcy and are rarely at risk. A 401(k), a 403(b), a pension, and IRAs are all covered, whichever exemption set you choose, with a very high federal cap that applies to IRAs. Money you put into a retirement account shortly before filing is not protected the same way under the Hawaiʻi set, so tell me about any recent contributions.
This matters because many people drain a retirement account trying to keep up with debt before they call me, when that account was safe all along. You usually should not spend down protected retirement money to pay debts that bankruptcy could discharge instead. If you are thinking about it, talk to me first.
Let's talk about your options.
I have helped more than a thousand people through this. Tell me what you are dealing with and I will tell you what you may qualify for: Chapter 7, Chapter 13, or another path entirely.
Everyday Belongings, Work Tools, and the Cash Problem
Your everyday belongings are protected in a Hawaiʻi bankruptcy: furniture, clothing, appliances, and the household goods that fill a normal home are covered under both exemption sets. The tools you need for your work are protected too, and as noted above, the Hawaiʻi set protects them without a dollar cap.
What the Hawaiʻi state set does not protect is cash, and this is where people get caught. Money in your bank account and a pending tax refund count as cash, and only the federal wildcard shields them. This is a big reason the federal set is my usual default, and a big reason the timing of your filing matters when a refund is on the way. If I file at the wrong moment, an otherwise protected refund can become money the trustee reaches.
Two Timing Traps That Catch Hawaiʻi Filers
Two timing rules trip up people who would otherwise keep everything, and both are easy to plan around once you know them.
The 730 day domicile rule. To use the Hawaiʻi exemptions, you must have been domiciled in the state for the two years (730 days) before you file. If you moved to the islands more recently, you may have to use your prior state's exemptions or the federal set instead. If you have arrived in Hawaiʻi within the last couple of years, tell me when you got here, because it changes which protections you can claim.
The 180 day windfall rule. If you become entitled to an inheritance, a life insurance payout, or a divorce settlement within 180 days after you file, that money can be pulled into your case even though it is already underway. What matters is when your right to the money arises, not when it lands in your account. In a Chapter 7, ordinary wages you earn after filing are safe. A Chapter 13 works differently, because the money you earn during the plan is part of the case. If something like this may be on the horizon, the timing of your filing matters a great deal, so tell me before I file.
Frequently Asked Questions
Do I have to use the Hawaiʻi state exemptions?
No. Hawaiʻi lets you choose between the Hawaiʻi state exemptions and the federal exemptions, and you use the set that protects more of your property. You cannot combine them, so the choice is made case by case. For most of my clients the federal set protects more, because it includes a wildcard that also covers cash and a pending tax refund.
Can I keep my home if I have a lot of equity?
Usually, yes. In Hawaiʻi, a married couple whose deed holds the home as tenants by the entirety can shield it from debts either spouse owes alone, no matter how much equity there is, whether one spouse files or both file together. That protection is created by the deed, not by the marriage itself, it depends on choosing the Hawaiʻi exemption set rather than the federal one, and it does not cover debts you both owe. When it does not fit your situation, Chapter 13 can protect the home instead. I look at the title and the numbers together before recommending a path.
Is my retirement account safe in bankruptcy?
Yes. Tax-qualified retirement accounts, including a 401(k), a 403(b), a pension, and IRAs, are protected in a Hawaiʻi bankruptcy and are rarely at risk. You should not drain a retirement account to pay debts that bankruptcy could discharge instead.
Can I protect the tools I need for my work?
Yes. Both exemption sets protect the tools of your trade, and the Hawaiʻi state set protects them with no dollar limit, as long as they are the tools your work actually requires. For someone whose livelihood depends on costly equipment, such as a fisherman's boat or a contractor's heavy vehicle, that protection can be the reason to choose the Hawaiʻi exemptions.
What if I recently moved to Hawaiʻi?
The exemptions you can use depend on how long you have lived here. To use the Hawaiʻi exemptions, you must have been domiciled in the state for the two years before filing. If you moved more recently, you may need to use your prior state's exemptions or the federal set, so tell me when you arrived.
Sources & Legal Authorities
The authorities behind this guide.
- United States Code. 11 U.S.C. § 522; § 522(b)(2); § 522(b)(3)(A); § 522(b)(3)(B); § 522(d); § 541(a)(5); § 704(a)(1); § 1306(a)(1); § 1306(a)(2)
- Hawaiʻi Revised Statutes. HRS § 386-57; § 509-1; § 509-2; § 651-92; § 651-121; § 651-124
- Cases. Sawada v. Endo, 57 Haw. 608, 561 P.2d 1291 (1977); United States v. Craft, 535 U.S. 274 (2002)
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