Stuck in Plastic Paradise: How Bankruptcy Can Help You Escape Credit Card Debt in Hawaii

Living in Hawaii it is easy for credit card debt to pile up. Bankruptcy may be a ticket to getting debt free.

For many Bankruptcy is a scary word. It is actually a legal and normal process designed to give you a fresh financial start. There are two main types of bankruptcy for individuals: Chapter 7 and Chapter 13.

Chapter 7: Waving Goodbye to Credit Card Debt (Mostly)

Imagine a clean slate—being debt free. That is the basic idea behind Chapter 7 bankruptcy. Most if not all of your assets are “exempted” meaning you keep them. You only shuck the debt. Your debt is “discharged.”

Benefits of Chapter 7 for Credit Cards:

• Elimination: This is the big one. Your credit card debt disappears.
• Fast Relief: Once you file you are protected from creditors and the whole process from start to discharge takes four and a half months.
• Fresh Start: In the last four decades I have never seen anyone who was anything other than delighted to “dump the debt”.

Things to Consider with Chapter 7:

• Not Everything Gets Discharged: Things like recent taxes, student loans, child support, and alimony are not discharged.
• Not for Everyone: Individuals with significant income or assets might not qualify for Chapter 7 due to a means test. This test compares your income to the median income for your household size in Hawaii.

Chapter 13: Reorganizing Your Debt for a Manageable Future

Chapter 13 takes a different approach. Instead of wiping the slate clean, we create a court-approved repayment plan that lasts between 3-5 years. The plan consolidates your debts, all of them, including credit cards, into one more manageable monthly payment.

Benefits of Chapter 13 for Credit Cards:

• Reduced Payments: You will only have to pay what you can afford based on your income and expenses. This can significantly reduce your monthly credit card payments, giving you breathing room.
• Protects Your Assets: Unlike Chapter 7, you get to keep ALL your property as long as you stay current on your repayment plan.
• Improves Credit Score Over Time: Making consistent payments under a Chapter 13 plan can actually help rebuild your credit score in the long run.

Things to Consider with Chapter 13:

• Commitment is Key: Sticking to the repayment plan for 3-5 years requires dedication. The lowered plan payments must be made to the trustee.

Remember, You’re Not Alone

Bankruptcy can feel overwhelming, but there is help available. Consulting with a qualified bankruptcy attorney familiar with Hawaii’s laws is crucial. They can assess your situation, advise you on the best course of action, and guide you through the entire process.

Do not let credit card debt drown out your peace of mind. There are options that you can explore. You can take control of your finances and get back to a debt-free life.