Choosing Between Debt Management & Chapter 13 Bankruptcy In Hawaii (2024)

Feb 15, 2024 | By Blake Goodman | Read Time: 4 minutes | Bankruptcy

Exploring Debt Relief Options In Hawaii: Navigating Through Debt Management & Chapter 13

In Chapter 13 bankruptcy, your debts are systematically restructured, providing you with a designated period to fulfill your payment obligations. This process bears resemblance to debt management plans, leading many to deliberate the choice between bankruptcy and debt management.A Debt Management Plan, on the other hand, is an agreement negotiated with your creditors to resolve your debts. These plans are typically chosen under two circ*mstances: either when your budget allows only for minimal monthly payments to creditors, or when you’re currently experiencing financial difficulties but expect to be able to cover your debt repayments soon.If you’re navigating the complexities of debt relief and unsure of the best path forward, consulting with experienced Hawaii bankruptcy attorneys could offer clarity and direction, ensuring you make informed decisions for your financial well-being.

Debt Management vs. Chapter 13 Bankruptcy: Key Differences Explained

Chapter 13 bankruptcy and debt management plans are financial tools aimed at helping you manage and repay your debts, but there are a few key differences in Hawaii.

Defining Chapter 13 Bankruptcy

Chapter 13 is a formal legal process that happens under the US Bankruptcy Code. It involves the creation of a court-approved repayment plan lasting 3-5 years, overseen by a Hawaii bankruptcy trustee. The plan addresses both secured and unsecured debts, and any remaining debts are discharged at the end of the plan. A Hawaii bankruptcy attorney is recommended for the process.

Defining Debt Management Plan

A Debt Management Plan is an informal agreement with creditors, typically arranged through a credit counseling agency. It involves negotiating lower interest rates and monthly payments, consolidating debts, and creating a structured plan to repay creditors over an extended period. It does not involve the court system and there are no discharged debts at the end of the plan.

Understanding The Legal Distinctions Between Chapter 13 Bankruptcy & Debt Management Plans

Debt Management Plan is not a legal proceeding, and creditors are not obligated to participate. While it may provide relief through reduced payments, it lacks the legal protections that come with bankruptcy. Additionally, it does not result in the discharge of debts. It focuses on repaying creditors in a more manageable way while maintaining the original balances.Filing for Chapter 13 triggers an automatic stay, which halts creditor actions for a time, including foreclosure. The Hawaiian court’s oversight provides legal protection, and the debtor must adhere to the court-approved plan. Successful completion of the plan results in the discharge of remaining eligible debts, allowing a fresh start for the debtor.

Expenses Associated With Debt Management & Chapter 13 Bankruptcy

Getting out of debt is never a free journey as there are fees associated with both bankruptcy and Debt Management Plans. Debt Management Plans typically have a start-up fee as well as a monthly fee that you must pay to acquire services. The fees can vary, but it is usually a percentage of your creditor payments, a fee based on how many accounts are on your plan, or a flat fee.While bankruptcy may entail higher upfront expenses, including filing fees, mandatory course costs, and potential legal representation fees to safeguard your rights and guide your decisions, it offers significant benefits. Opting for bankruptcy with the assistance of a skilled Hawaii bankruptcy lawyer can provide a structured path to financial recovery.

The Impact Of Debt Management Plans & Chapter 13 Bankruptcy On Credit Score

While a Debt Management Plan may impact credit scores, it is generally less severe than bankruptcy. The notation of participation in a Debt Management Plan may be visible on credit reports, but the score only drops slightly at the beginning of your plan.Chapter 13 Bankruptcy in Hawaii presents a proactive, albeit more substantial, approach to financial restructuring. Despite the immediate, more pronounced effect on credit scores and the seven-year visibility on credit reports, bankruptcy paves the way for a robust financial recovery. Over time, it offers a structured opportunity to rebuild your credit score, laying a solid foundation for regaining financial independence and security. Our law firm’s “2 Years to a 720 Credit Score” program is designed to help you improve and rebuild your credit, aiming to get your score up to 720 or higher in just two years.

Am I Better Off Choosing a Debt Management Plan Or Chapter 13 Bankruptcy?

Choosing between a Debt Management Plan and Chapter 13 bankruptcy in Hawaii hinges on your specific financial situation. If you’re facing overwhelming financial challenges that seem insurmountable, Chapter 13 could be the viable solution, particularly if safeguarding your home and assets is a priority.On the other hand, Debt Management Plans are often more affordable, carry fewer long-term implications, and offer greater flexibility if you decide to opt-out. For personalized advice tailored to your unique circ*mstances, consulting with a seasoned Hawaii bankruptcy attorney is advisable.

Contact Our Seasoned Hawaii Bankruptcy Lawyers Today!

At Blake Goodman, our team of proficient bankruptcy lawyers possesses a profound grasp of Hawaii’s bankruptcy regulations and is dedicated to guiding you through the intricacies of your financial predicament. We are here to assist you in charting a path to a renewed financial beginning.Don’t hesitate—contact us immediately for a complimentary consultation and embark on your journey towards financial recovery and stability. Let us provide the support and expertise you need to regain control of your financial future.

Blake Goodman

Blake Goodman received his law degree from George Washington University in Washington, D.C. in 1989 and has been exclusively practicing bankruptcy-related law in Texas, New Mexico, and Hawaii ever since. In the past, Attorney Goodman also worked as a Certified Public Accountant, receiving his license form the State of Maryland in 1988.

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Choosing Between Debt Management & Chapter 13 Bankruptcy In Hawaii (2024)

FAQs

Can I file bankruptcy after a debt management plan? ›

Yes, you can file bankruptcy even if you're in or were in a debt relief program such as a debt management plan. Once you file your bankruptcy case with the court, you can stop making the payments under the debt relief plan you're in (if you haven't already).

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What percentage of Chapter 13 bankruptcies are successful? ›

Chapter 13 should never be filed without a lawyer. Chapter 13 cases filed with an attorney already have only a 33% success rate; that number drops to a 2.3 % success rate without a lawyer. In fact, many bankruptcy trustees will tell you they have never seen a successful Chapter 13 case where a debtor was unrepresented.

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What is the difference between debt management plan and bankruptcy? ›

A DMP is an informal debt solution. It helps you pay back your debts at a rate you can afford. Bankruptcy is a legal form of insolvency. It is for people who cannot pay their debts in a good amount of time.

How do individuals choose between the two chapters? ›

Choosing between Chapter 7 and Chapter 13 bankruptcy depends on your financial situation and how you want to resolve your debts. Chapter 7 is fast and allows you to settle your eligible debts. Filing for Chapter 13 bankruptcy will allow you to hold on to your assets and pay off all your debts over several years.

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What is better, debt relief or chapter 13? ›

“Chapter 13 bankruptcy offers all of the benefits of a debt settlement plan, but you also get tax-free debt forgiveness, all interest and fees stop piling up, collection efforts stop and when you're finished, you are free of debts.”

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Can creditors refuse a debt management plan? ›

If the creditor doesn't want to deal with the DMP provider, they can still take action to recover the money you owe, which might include taking you to court. If this applies to you, ask the creditor why they're not willing to co-operate with the DMP.

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Is it better to file bankruptcy or pay your debt? ›

Bankruptcy frees you from debt collection, but the headaches can linger for years. Debt settlement without bankruptcy can take more time but — if negotiated properly — can do less damage to your credit. Debt settlement stays on your credit report for seven years, but has less negative impact on your credit score.

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Which bankruptcy forgives all debt? ›

Chapter 7 Bankruptcy. According to the U.S. Courts, the purpose of Chapter 7 bankruptcy is to clear most if not all of your debt in a relatively short time frame. The large majority of people filing Chapter 7 are able to exempt or retain all of their assets.

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Can you get out of a debt management plan? ›

A DMP isn't a legally binding agreement. This means that you can cancel it if you want to. There are a number of reasons why you might want to cancel, including: you're not happy paying a fee each month which means there's less money left to pay your creditors.

Will Chapter 13 take all my money? ›

The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under chapter 7.

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How much would my Chapter 13 payment be? ›

To calculate your monthly payment amount in a Chapter 13 bankruptcy, calculate your income for the six months before your bankruptcy filing. Deduct allowable expenses to determine your disposable income. Pay your priority debtors and any secured debts that you want to keep after the bankruptcy.

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Does Chapter 13 trustee monitor income? ›

Trustees do not monitor your income during the course of your repayment. However, a trustee possesses what Ginter terms “broad powers” and responsibilities. They include: Determining if you qualify for Chapter 13 bankruptcy.

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What are three debts that Cannot be erased by filing bankruptcy? ›

Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal ...

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What loans Cannot be discharged through bankruptcy? ›

Key takeaways. Loans, medical debt and credit card debt are generally all able to be discharged through bankruptcy. Tax debt, alimony, spousal or child support and student loans are all typically ineligible for discharge.

What happens after a debt management plan? ›

When your DMP ends, you can close the accounts you've paid off, or start making full payments again. Your score should recover over time if you continue to meet all repayments. Records of your debts will take six years to drop off your report, but lenders may pay less attention to them as they age.

Can I get a loan while on a debt management plan? ›

It's probably against the terms of your debt management plan (DMP) to take out a loan without speaking to your DMP provider first. This is because - although it may be possible to get a loan during a DMP - it's not usually a good idea. Any spare income you have will be going towards paying off your existing debts.

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