Hawaii Bankruptcy Exemptions

Almost every guide to Hawaii bankruptcy exemptions asserts that Hawaii is a “non-opt-out state” and moves on. None of them shows the working, and the working is the interesting part, because the claim is a negative. There is no Hawaii section headed “federal exemptions permitted.” If you go looking for one you will not find it, and it is easy to conclude the sources are wrong. They are not wrong; they are describing something proved by absence, and absence has to be demonstrated rather than asserted.

Step one is the federal default. 11 U.S.C. 522(b)(2) provides that the property a debtor may elect under that paragraph is “property that is specified under subsection (d), unless the State law that is applicable to the debtor under paragraph (3)(A) specifically does not so authorize.” Read that carefully: the federal schedule is on by default. A state does not switch it on, it switches it off, and it has to do so specifically. So the research question inverts – do not hunt for a Hawaii permission, hunt for a Hawaii prohibition.

Step two is to enumerate the chapter. HRS chapter 651, “Attachment and Execution,” is where Hawaii’s exemptions live. Its published sections run 651-1 through 651-21; 651-31 through 651-52, including 651-32.1; 651-61 through 651-65 and 651-68 through 651-70; 651-91 through 651-96; and 651-121 through 651-124. The chapter ends there – the Legislature’s own published listing for chapter 651 stops at section 651-124, and there is no 651-125. Working through those sections, none of them bars, restricts or conditions 11 U.S.C. 522(d). That is the demonstration, and it is one a reader can repeat in about ten minutes.

Step three is affirmative confirmation, and Hawaii happens to supply it. A negative proved only by absence is always a little uncomfortable – you may simply have missed the section. Hawaii removes that doubt from the other direction. HRS 651-124 protects retirement money “from attachment, execution, seizure, the operation of bankruptcy or insolvency laws under title 11 United States Code section 522(b), or under any legal process.” A legislature that had disallowed the 522(d) election would not then draft its pension exemption to operate through 522(b), the very subsection that carries the election. The cross-reference is not decisive on its own, but combined with the enumeration it settles the question.

One consequence of the election being open here. A federal tie-breaker that does nothing at all in an opt-out state is live here. Spouses filing together are required by 11 U.S.C. 522(b)(1) to land on the same schedule, and if they will not agree, the statute chooses for them – it deems them to have taken the federal list, but only in a jurisdiction whose law permits that election. In California or Florida the clause simply idles, because there is no permitted election for it to fall back on. In Hawaii it operates, so a disagreement between joint filers ends up resolved in favour of 522(d). Doubling works off a different provision, 11 U.S.C. 522(m), under which the exemption section runs separately for each debtor in a joint case; that is what stands behind the familiar doubled federal figures. Whether any Hawaii state figure doubles is a state-law question we are not going to answer here.

This is worth spelling out because the same problem recurs wherever a state is described as not having opted out, and most pages that make the claim have never checked it. Texas presents the identical difficulty from the opposite direction – it has a section that looks like an opt-out and is not one, so the same enumeration has to be run there too.

HRS 651-124, “Pension money exempt,” is the section this page is built on, and it is unusually generous in one respect and unusually sharp in another.

The generous part. It exempts a debtor’s right to “a pension, annuity, retirement or disability allowance, death benefit, any optional benefit, or any other right accrued or accruing” under a plan or arrangement described in Internal Revenue Code sections 401(a), 401(k), 403(a), 403(b), 408, 408A, 409 as in effect before January 1, 1984, 414(d) or 414(e), together with any fund created by such a plan and any ABLE savings account established under HRS chapter 256B. That is nine enumerated Code provisions plus the ABLE accounts, and the section attaches no dollar limit to any of them. Note by contrast that the federal alternative does cap one category: 11 U.S.C. 522(n) limits IRA-type accounts to $1,711,975 as adjusted from April 1, 2025. For a debtor with a very large IRA who is otherwise choosing the federal set, that difference is worth knowing about.

The sharp part is the two exceptions. The section says it “shall not apply to,” first, “a ‘qualified domestic relations order’ as defined in section 206(d) of the Employee Retirement Income Security Act of 1974, as amended, or in section 414(p) of the Internal Revenue Code of 1986, as amended” – so a QDRO reaches the money the exemption otherwise protects. Second, and this is the one that surprises people, “contributions made to a plan or arrangement within the three years before the date a debtor files for bankruptcy, whether voluntary or involuntary, or within three years before the date a civil action is initiated against the debtor.” That second exception has its own carve-out for “contributions to a retirement plan established by state statute if the effect would be to eliminate a state employee’s retirement service credit,” which protects Hawaii public employees from losing service credit through the operation of the clawback. Notice what that second exception does structurally: it puts the timing of a transfer inside the exemption itself rather than leaving it as something a trustee must attack from outside, and it starts the clock at the initiation of a civil action as well as at the petition – so money moved into a plan while a suit was already running is measured against the same three years.

And then a federal qualification the state text does not mention. The case notes published with HRS 651-124 record the holding that ERISA section 206(d)(1) “erects a general bar to the garnishment of pension benefits from ERISA-covered plans,” and that “insofar as compliance with both section 206(d)(1) of ERISA and the exception to this section is ‘a physical impossibility’, the exception to this section is preempted to the extent that it actually conflicts with ERISA,” at 90 H. 345, 978 P.2d 783 (1999). The three-year contribution exception, in other words, does not simply operate against an ERISA-covered plan. Whether it operates against a particular plan is a legal question with a real answer, and it is one for counsel and the trustee rather than for a research file. The section’s own history line runs “[L 1986, c 289, 1; am L 2004, c 34, 1; am L 2005, c 152, 2; am L 2015, c 206, 3; am L 2016, c 55, 32]”, so unlike most of chapter 651 this section has been maintained.

The common thread is that both of the questions this page raises – which state’s exemption law applies, and whether the schedules are complete – are factual before they are legal. Domicile over 730 days is established from records. So is a parcel in another state. Neither is answered by reading HRS chapter 651.