Report Title:

Attachment and Execution; Protection From Creditors

 

Description:

Amends the attachment and execution law to increase real property and alternative real property exemptions and the motor vehicle exemption; provide for separate individual exemptions for spouses and reciprocal beneficiaries; and add a "wild card" exemption for personal property that is not otherwise exempt.

HOUSE OF REPRESENTATIVES

H.B. NO.

527

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to attachment and execution.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that the tragic events of September 11, 2001, and the uncertainties in today's economy have unfortunately had the consequence of leading a number of Hawaii's residents into bankruptcy. However, the legislature finds that many of Hawaii's laws relating to attachment and execution have not been amended to reflect current living conditions in the State. The legislature finds that there is a need to update these laws to protect certain essential properties of people who have filed for bankruptcy protection, and for other individuals who have been sued by creditors. Accordingly, the purpose of this Act is to make the following changes in that law:

(1) Increase the real property exemption in section 651-92(a)(1), Hawaii Revised Statutes, from $30,000 to $60,000 for heads of a family or individuals sixty-five years of age and older, and exempting the alternative real property exemption in subsection (a)(2) from $20,000 to $40,000. The legislature finds that the original provisions were approved in 1976, when real estate prices were much lower than they are today. However, real estate values have increased three to four times since the enactment of section 651-92, without any similar increases in exemptions. Today, the current median sales price for a single family home in Honolulu is over $350,000, and approximately $150,000 for condominiums. The legislature therefore finds that exempting $60,000 for heads of households and the elderly and $40,000 for others is reasonable given current market conditions;

(2) Amend section 651-121, Hawaii Revised Statutes ("certain personal property and insurance thereon, exempt"), by increasing the motor vehicle exemption from $2,575 up to a value of $5,000. The legislature finds that in today's market, it is unrealistic to expect Hawaii's residents to have an automobile that is in reasonable running condition for anything less than $5,000 at a minimum. The legislature finds that an exemption of $5,000 is more reasonable than the current motor vehicle exemption of $2,575, and will permit an individual to keep an automobile up to a value of $5,000;

(3) Amend section 651-121, Hawaii Revised Statutes, to provide for separate individual exemptions for spouses and reciprocal beneficiaries. The legislature finds that the current law is not clear as to whether, in cases in which joint debtors are involved, each person is entitled to a separate exemption or whether only a single exemption is available to both persons. This amendment clarifies the law to allow spouses and reciprocal beneficiaries to individually claim separate exemptions; and

(4) Amend section 651-121, Hawaii Revised Statutes, to exempt a person's aggregate interest in any personal property that is not otherwise exempt, up to a maximum of $7,500. The legislature finds that Hawaii does not currently have a "wild card" exemption, similar to the federal Bankruptcy Code, 11 U.S.C. 522(d)(5), which permits a maximum wild card exemption of $9,650 in 2002. Amending Hawaii's law to allow a wild card exemption would permit a person to exempt any personal property that is otherwise non-exempt from creditors up to a value of $7,500, and will provide a small measure of protection for people with small savings or checking accounts, college savings for their children, hobbies, insurance claims, and related matters.

The legislature finds that this Act will provide a small measure of protection to Hawaii residents, and improve their chance to have a fresh start after having suffered serious financial problems, whether from losing a job, disability or illness, or other causes.

SECTION 2. Section 651-92, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Real property shall be exempt from attachment or execution as follows:

(1) An interest in one parcel of real property in the State of Hawaii of a fair market value not exceeding [$30,000] $60,000 owned by [the defendant] an individual who is either the head of a family or [an individual] sixty-five years of age or older[.]; and

(2) An interest in one parcel of real property in the State of Hawaii of a fair market value not exceeding [$20,000] $40,000 owned by [the defendant who is a person] an individual.

The fair market value of the interest exempted in [paragraphs] paragraph (1) or (2) shall be determined by appraisal and shall be an interest which is over and above all liens and encumbrances on the real property recorded prior to the lien under which attachment or execution is to be made. Not more than one exemption shall be claimed on any one parcel of real property even though more than one person residing on such real property may otherwise be entitled to an exemption.

Any claim of exemption under this section made before May 27, 1976, shall be deemed to be amended on May 27, 1976, by increasing the exemption to the amount permitted by this section on May 27, 1976, to the extent that such increase does not impair or defeat the right of any creditor who has executed upon the real property prior to May 27, 1976."

SECTION 3. Section 651-121, Hawaii Revised Statutes, is amended to read as follows:

"651-121 Certain personal property and insurance thereon, exempt. (a) The following described personal property of an individual up to the value set forth shall be exempt from attachment and execution as follows:

(1) All necessary household furnishings and appliances, books and wearing apparel, ordinarily and reasonably necessary to, and personally used by a debtor or the debtor's family residing with the debtor; and, in addition thereto, jewelry, watches, and items of personal adornment up to an aggregate cash value not exceeding $1,000[.];

(2) One motor vehicle up to a value of [$2,575] $5,000 over and above all liens and encumbrances on the motor vehicle; provided that the value of the motor vehicle shall be measured by established wholesale used car prices customarily found in guides used by Hawaii motor vehicle dealers; or, if not listed in such guides, fair wholesale market value, with necessary adjustment for condition[.];

(3) Any combination of the following: tools, implements, instruments, uniforms, furnishings, books, equipment, one commercial fishing boat and nets, one motor vehicle, and other personal property ordinarily and reasonably necessary to and personally owned and used by the debtor in the exercise of the debtor's trade, business, calling, or profession by which the debtor earns the debtor's livelihood[.];

(4) One parcel of land, not exceeding two hundred fifty square feet in size, niche or interment space owned, used, or occupied by any person, or by any person jointly with any other person or persons, in any graveyard, cemetery, or other place for the sole purpose of burying the dead, together with the railing or fencing enclosing the same, and all gravestones, tombstones, monuments, and other appropriate improvements thereon erected[.];

(5) The proceeds of insurance on, and the proceeds of the sale of, the property in this section mentioned, for the period of six months from the date the proceeds are received[.];

(6) The wages, salaries, commissions, and all other compensation for personal services due to the debtor for services rendered during the thirty-one days before the date of the proceeding[.]; and

(7) The debtor's aggregate interest in any personal property that is not otherwise exempted by this part, not to exceed in value $7,500.

(b) Each spouse or reciprocal beneficiary may claim a separate personal property exemption under this section."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:

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