Hawaii Caption — Bankruptcy is the legal process of liquidating a person's assets and liabilities in order to eliminate or restructure debt. It allows an individual or business to reorganize or discharge debts and make arrangements to pay creditors over a period of time. There are two main types of bankruptcy proceedings in Hawaii: Chapter 7 and Chapter 13. Chapter 7 bankruptcy in Hawaii is also known as "liquidation bankruptcy" because it involves the liquidation of a debtor's assets to pay off creditors. This type of bankruptcy is ideal for people with limited income and few assets. It discharges unsecured debt, such as credit card debt and medical bills, and provides a fresh start for the debtor. Chapter 13 bankruptcy in Hawaii, also known as "wage-earner bankruptcy," is designed for those who have a steady source of income and can afford to pay some of their debts. Under this type of bankruptcy, debtors are allowed to keep their property and make payments to creditors over a period of three or five years. At the end of the repayment period, any remaining debts are discharged.