Business Debt Settlement in Hawaii
Top Business Debt Settlement Firms Serving Hawaii in 2026
By law, nobody can offer debt settlement services in Hawaii if they’re not a licensed Hawaii lawyer. The penalty for breaking that law is up to six months in jail, $500 fine, or both. The penalty shows just how seriously Hawaii takes the law against debt settlement companies.
A Lawyer Who Can File Bankruptcy
Why does a debt settlement lawyer get a better deal? For one reason: both sides are trying to settle the case to avoid something worse. Debt settlement companies can’t offer that. A lawyer who can file bankruptcy shows the creditor what they might get in bankruptcy - and may convince them to take less than their alternative would bring. A lawyer knows the math for how much a creditor might get out of a Chapter 7 (hint: it’s less than they hope). They can show the creditor why the offer is a good deal.
Debt settlement companies can’t file bankruptcy to protect you. You usually stop making any payments to creditors, and you deposit money each month into an account. During this time, your accounts will go delinquent and build up late fees and interest. While you aren’t paying, creditors can still file lawsuits to collect on debts. The debt settlement company will try to negotiate and settle the debts with your creditors, using the balance in your account to offer settlement. (Debt settlement companies are not lawyers and can’t give legal advice or represent you in court if creditors sue you).
The impact of legal representation is more than many people think. First off, debt collectors who know you have a lawyer generally have to direct all communications to your lawyer, not to you. If a creditor sues, you have an attorney who can defend your rights in court. If needed, your lawyer can help you file bankruptcy, and the automatic stay stops most collection.
A key decision to make early in your plan is what to pay, and when to pay it. You don’t have to stop paying your mortgage or your car loan. While debt settlement companies make it seem like you have to stop paying creditors altogether, that’s not true.
If you decide to pay off a debt before bankruptcy, think again. It can backfire on you. It could let the Chapter 7 trustee get the money back for creditors if you file bankruptcy within 90 days after the payment. If it’s an insider, the time is one year. Insiders can include family members. A lawyer plans the order and timing of any lump sum payments.
If you settle a debt for less than the balance, the creditor may send you and the IRS a Form 1099-C for the forgiven amount. Unless you can claim the insolvency or bankruptcy exclusion, the IRS considers the forgiven balance to be taxable income in the year it was forgiven.
Another reason to hire a lawyer is because you’re not going to have one creditor and one lawsuit. Businesses have lines of credit, leased equipment, landlord, vendors, taxes, and maybe you co-signed on all of it. A lawyer weighs your options: Chapter 11, Chapter 7, wind-down.
Subchapter V is a Chapter 11 for small business bankruptcies. The qualification limit is $3,424,000 in debt, since April 1, 2025. Congress passed a bill (H.R. 7730) to raise it to $7.5 million but as of this writing it hasn’t been signed yet. The Hawaii court charges $1,738 to file Chapter 11.
To vet a lawyer, search for your lawyer by first and last name on the Hawaii State Bar Association website. The lawyer’s profile shows whether they may actively practice law in Hawaii. Private reprimands are confidential, so a lawyer’s record won’t show any private reprimands. The Office of Disciplinary Counsel can’t tell the public which attorneys have received any, and even their website only reports public discipline.
Hawaii ethics rules for lawyers protect you when hiring a lawyer. A lawyer must put in writing the scope of work and fee basis, unless the cost will be $250 or less, or you are billed as a regular client at same rate. No lawyer fee can be non-refundable in Hawaii. The lawyer can only withdraw money from the bank account as the services are performed.
It’s possible to get a creditor to agree to a lump-sum payoff at a reduced amount if you can put a big chunk of money on the table. Sometimes bankruptcy is a better option.
With a lawyer, you have the peace of mind that the lawyer is bound by professional ethical rules. A lawyer knows Hawaii bankruptcy laws, and how to apply them to give you the strongest position possible.