Hawaii Revised Statutes (HRS) Chapter 651D, the Uniform Voidable Transactions Act (UVTA), governs fraudulent transfers and provides remedies for creditors seeking to recover assets transferred by a debtor with the intent to hinder, delay, or defraud them. A transfer is considered voidable if it is made with actual intent to hinder, delay, or defraud creditors. HRS § 651D-04(a)(1) outlines badges of fraud that courts may consider when determining actual intent. These include, but are not limited to, transfer to an insider, retention of possession or control of the asset by the debtor, concealment of the asset or its transfer, whether the debtor had been sued or threatened with suit, and whether the transfer was of substantially all of the debtor’s assets. In this scenario, Mr. Kamaka’s transfer of his valuable beachfront property to his brother, an insider, shortly after receiving a significant adverse judgment in a lawsuit filed by Ms. Kealoha, and retaining the right to use the property for a period, strongly suggests actual intent to hinder or delay Ms. Kealoha’s collection efforts. The UVTA allows a creditor, upon proving such a transfer, to avoid the transfer to the extent necessary to satisfy the creditor’s claim, or to obtain a judgment against the initial transferee for the value of the asset transferred. The correct answer is the ability to avoid the transfer of the property.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) significantly altered the landscape of bankruptcy law in the United States, including provisions impacting Hawaii. A key aspect of BAPCPA was the introduction of a “means test” for Chapter 7 eligibility, designed to prevent debtors with sufficient income from utilizing Chapter 7. Under Hawaii law, as with federal bankruptcy law, if a debtor’s income exceeds the median income for a household of similar size in Hawaii, they are presumed to be able to pay a significant portion of their debts. This presumption can be rebutted by showing special circumstances. However, the question specifically asks about the presumption of abuse based on income exceeding the median, which is a direct application of the means test. The means test calculation involves comparing the debtor’s disposable income to certain thresholds. For the purpose of this question, we are concerned with the initial presumption of abuse, not the subsequent steps of the means test which involve deductions. The question states that the debtor’s monthly income is \$8,500 and the median monthly income for a family of four in Hawaii is \$7,000. The difference is \$8,500 – \$7,000 = \$1,500. BAPCPA established a threshold where if disposable income exceeds a certain amount (which varies by state and household size, but the presumption is triggered by income exceeding the median), it indicates a potential for abuse. The core concept tested here is the initial income comparison against the state median, which triggers the presumption. The subsequent detailed calculations of disposable income are for rebuttal purposes. Therefore, the debtor’s income exceeding the median income for a family of four in Hawaii creates a presumption of abuse under federal bankruptcy law, which is applicable in Hawaii.

The scenario involves a business in Hawaii that has filed for Chapter 11 bankruptcy. A critical aspect of Chapter 11 proceedings is the classification of claims and interests within the proposed plan of reorganization. Section 1129(a)(1) of the U.S. Bankruptcy Code mandates that a plan must comply with the applicable provisions of the Code. Section 1122 specifically addresses the classification of claims, stating that a plan may place a claim or interest into a particular class only if it is substantially similar to the other claims or interests of that class. Furthermore, Section 1123(a)(4) requires that the plan provide the same treatment to each claim or interest of a particular class, unless the holder of the claim or interest has consented to a different treatment. In this case, the creditor holding the unsecured trade debt is seeking to be placed in a separate class from other general unsecured creditors, arguing that their claims are unique due to the nature of the goods previously supplied. However, under Hawaii insolvency law, which follows federal bankruptcy principles, unsecured trade debts are generally considered substantially similar unless there is a compelling legal or equitable reason to treat them differently. The court would typically scrutinize any proposed separate classification to ensure it is not discriminatory or designed to manipulate voting on the plan. The debtor’s proposed classification, which lumps all general unsecured trade debts together, is consistent with the principle of classifying substantially similar claims. The question revolves around the permissibility of this classification under the Bankruptcy Code, which governs insolvency proceedings in Hawaii.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) significantly amended U.S. bankruptcy law, including provisions related to means testing for Chapter 7 eligibility. For individuals seeking to file under Chapter 7, BAPCPA introduced a “means test” to determine if their income is presumed to be sufficient to repay some portion of their debts, thereby potentially directing them to Chapter 13. This test compares the debtor’s income to the median income in their state for a household of similar size. If the debtor’s income exceeds the state median, certain expenses are deducted to calculate disposable income. If this disposable income, when multiplied by 60, is greater than a specified threshold, the presumption of abuse arises, and the debtor may not be eligible for Chapter 7. Hawaii, as a U.S. state, is subject to these federal bankruptcy provisions. The calculation involves comparing the debtor’s current monthly income to the median income for a family of the same size in Hawaii. If the debtor’s income is above the median, the calculation of disposable income involves subtracting specific allowable expenses as defined by federal law. The resulting disposable income is then multiplied by 60 months. If this product exceeds a certain amount, it triggers the presumption of abuse. The question tests the understanding of this federal mechanism as it applies to Hawaii debtors, focusing on the core principle of the means test and its impact on Chapter 7 eligibility, rather than a specific numerical outcome, as the exact median income and expense figures can fluctuate and are not the focus of conceptual understanding. The correct option reflects the application of the federal means test to a Hawaii resident.

In Hawaii insolvency law, particularly concerning the distribution of assets in a liquidation proceeding under Chapter 7 of the Bankruptcy Code, the priority of claims is strictly defined by federal law, which supersedes state law in bankruptcy matters. Secured claims, which are backed by specific collateral, are paid first from the proceeds of that collateral. Unsecured claims are then paid in a statutory order of priority. Among unsecured claims, certain priority claims, such as administrative expenses and specific taxes, are paid before general unsecured claims. Wages earned by employees are considered priority unsecured claims under 11 U.S.C. § 507(a)(4), with a statutory cap. For instance, wages earned within 180 days before the bankruptcy filing date, up to a specified amount per employee, receive priority. In this scenario, the wages earned by the former employees of the defunct Hawaiian resort, totaling $50,000, would fall into this priority category. However, the total amount of priority unsecured claims must be considered. If the total priority unsecured claims, including wages and other statutory priorities, exceed the available funds after secured claims and administrative expenses are paid, then the priority unsecured claims will be paid on a pro rata basis. The question asks about the *priority* of these wages, not the exact amount they will receive if there are insufficient funds to pay all priority claims in full. Therefore, wages earned by employees within the statutory period are a priority unsecured claim.

The scenario describes a situation involving a debtor who has filed for Chapter 7 bankruptcy in Hawaii. The debtor possesses an asset that is subject to a valid security interest held by a creditor. The question pertains to the debtor’s ability to retain this asset post-discharge. In Chapter 7 bankruptcy, debtors can typically retain secured property by reaffirming the debt, redeeming the property, or by making arrangements with the secured creditor. Reaffirmation requires court approval and is a voluntary agreement to remain liable for the debt. Redemption involves paying the creditor the current market value of the collateral. If the debtor neither reaffirms nor redeems, and the creditor has a valid lien, the creditor generally has the right to repossess the collateral. The debtor’s statement of intention filed under 11 U.S.C. § 521(a)(2) outlines their plans for secured property. If the debtor intends to keep the property and is current on payments, reaffirmation or continued payments might be the path. However, if the debtor is behind on payments and wishes to retain the property, reaffirmation is often necessary, especially if the creditor opposes continued possession without reaffirmation. The prompt implies a desire to retain the property despite potential delinquency, making reaffirmation the most likely legal mechanism, subject to court approval and the creditor’s agreement, to avoid repossession. The other options are less direct or legally insufficient for retaining the property under these circumstances. Redemption is an alternative but requires a lump sum payment of the collateral’s value, which may not be feasible. Surrendering the property would result in its loss. Simply stating an intention to keep it without legal recourse against the creditor’s secured interest is insufficient. Therefore, reaffirmation, with court approval, is the operative legal step for a Chapter 7 debtor to retain secured property when they are not current on payments and wish to avoid repossession.

In Hawaii insolvency law, specifically concerning the dischargeability of debts in bankruptcy, the concept of “necessaries” is crucial. Certain debts, even if incurred before bankruptcy, may not be dischargeable if they fall under the category of necessaries. This is to ensure that individuals are not relieved of obligations for essential goods and services that sustained them or their dependents. The Bankruptcy Code, particularly Section 523(a)(2), (a)(4), and (a)(6), addresses non-dischargeable debts. However, the determination of what constitutes “necessaries” is often a matter of state law, as federal bankruptcy law generally defers to state definitions in this regard. Hawaii, like many states, defines necessaries broadly to include items such as food, clothing, shelter, and medical services. The purpose behind this non-dischargeability provision is to prevent debtors from using bankruptcy to escape responsibility for essential living expenses, thereby protecting creditors who provided these vital goods and services. The question tests the understanding of how state law, specifically Hawaii’s interpretation of “necessaries,” interacts with federal bankruptcy law to determine debt dischargeability. The specific scenario involves a debt for a luxury item, which by definition would not qualify as a necessary, thus making it dischargeable.

In Hawaii insolvency law, specifically concerning the avoidance of preferential transfers under Hawaii Revised Statutes (HRS) Chapter 651B, a transfer made by an insolvent debtor within 90 days before the filing of a bankruptcy petition (or within one year if the transfer was to an insider) is presumed to be a preference. To avoid such a transfer, a creditor must demonstrate that the transfer was made to or for the benefit of a creditor, for or on account of an antecedent debt, made while the debtor was insolvent, and that the transfer enabled the creditor to receive more than such creditor would have received in a Chapter 7 liquidation. The debtor must have had a reasonable cause to believe that the debtor was insolvent at the time of the transfer. HRS § 651B-101 defines an insider broadly to include relatives, general partners, directors, officers, and managing agents of the debtor, as well as entities over which the debtor has control. The question involves a transfer to a relative, which falls under the definition of an insider. The transfer occurred 100 days prior to the filing of the bankruptcy petition. While the general preference period is 90 days, the extended period for insiders is one year. Therefore, the 100-day period is within the one-year insider preference period. The critical element for avoidance against an insider, beyond the standard elements of a preference, is the debtor’s reasonable cause to believe they were insolvent at the time of the transfer. If the debtor’s accountant had previously advised them of significant financial distress and the likelihood of insolvency, this establishes the debtor’s knowledge. Without evidence to the contrary, the presumption of insolvency and the debtor’s knowledge of it would likely be met. Thus, the transfer is avoidable as a preference.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) significantly altered the landscape of consumer bankruptcy in the United States, including provisions that impact the determination of a debtor’s eligibility for Chapter 7 relief. A key element introduced by BAPCPA is the “means test,” codified at 11 U.S.C. § 707(b). This test presumes that a debtor is eligible for Chapter 7 if their income is below the state median for a household of similar size. If the debtor’s income exceeds the state median, the means test then scrutinizes their disposable income. Disposable income is calculated by subtracting certain allowed expenses from current monthly income. If, after subtracting these expenses, the debtor’s disposable income over a five-year period (60 months) meets or exceeds a statutory threshold, the presumption of abuse arises, and the case may be dismissed or converted to Chapter 13. The statutory threshold for disposable income is generally \$12,850 or 10% of the debtor’s non-contingent, non-liquidated unsecured debts, whichever is greater, though these figures are subject to periodic adjustment for inflation. In this scenario, Kaimana’s current monthly income is \$7,500, and his monthly expenses allowed under § 707(b)(2)(A) total \$5,500. This results in a disposable monthly income of \$7,500 – \$5,500 = \$2,000. Over a 60-month period, this amounts to \$2,000/month * 60 months = \$120,000. The statutory threshold for a presumption of abuse is the greater of \$12,850 or 10% of his unsecured debts. Assuming Kaimana has \$40,000 in unsecured debts, 10% of that is \$4,000. Therefore, the threshold is the greater of \$12,850 or \$4,000, which is \$12,850. Since Kaimana’s projected disposable income over 60 months (\$120,000) significantly exceeds this threshold (\$12,850), a presumption of abuse arises under 11 U.S.C. § 707(b). This presumption can be rebutted by proving special circumstances such as a serious medical condition or a call or liability to support a dependent child, but based solely on the income and expense figures, the presumption is triggered.

The question concerns the application of Hawaii’s Revised Statutes Chapter 651D, specifically regarding the priority of claims in insolvency proceedings. This chapter, which governs the distribution of assets in insolvency cases, establishes a statutory scheme for the order in which various types of creditors are to be paid. Secured creditors, by virtue of a valid lien on specific property, generally have the highest priority with respect to that property. Unsecured creditors are paid after secured creditors, and their priority among themselves is typically pro rata, unless specific statutory provisions dictate otherwise. Administrative expenses incurred during the insolvency proceeding, such as the costs of administering the estate and professional fees, are usually given a high priority, often paid before or concurrently with certain classes of unsecured claims. The concept of “superpriority” is reserved for specific situations, such as certain tax liens or claims arising from the continued operation of a business under court supervision, which are granted precedence over even secured claims in some circumstances. In this scenario, the bank holds a perfected security interest in the debtor’s inventory and accounts receivable, making it a secured creditor. The legal firm’s claim for services rendered in preparing the bankruptcy petition is an administrative expense. The suppliers’ claims for goods sold on credit are unsecured. Therefore, the bank’s claim would be satisfied first from the proceeds of the collateral. The legal firm’s administrative claim would then be paid from the remaining assets, followed by the unsecured suppliers on a pro rata basis. The question asks about the priority of the suppliers’ claims relative to other claims. Suppliers, as unsecured creditors, have a lower priority than secured creditors and typically lower priority than administrative expenses. Their claims are satisfied only after these higher-priority claims have been met, and they share proportionally in any remaining assets.

The scenario involves a business operating in Hawaii that has encountered significant financial distress. Under Hawaii insolvency law, specifically referencing principles similar to those found in the Uniform Voidable Transactions Act as adopted and interpreted in Hawaii, certain pre-insolvency transactions can be challenged by a trustee or creditors. A transfer made by an insolvent debtor for less than reasonably equivalent value, while the debtor was engaged in a business or transaction for which its remaining assets were unreasonably small, is considered a fraudulent transfer under HRS § 651C-4(a)(2). This provision focuses on constructive fraud, meaning intent to defraud is not required; the circumstances themselves create the presumption of fraud. The transfer to the supplier occurred when the debtor’s remaining assets were indeed unreasonably small, as evidenced by its inability to pay its other debts as they became due. Therefore, the trustee can seek to avoid this transfer. The key element for avoidance under this specific subsection is the lack of reasonably equivalent value exchanged for the transfer, coupled with the debtor’s unreasonably small capital at the time of the transfer, regardless of whether the debtor was then insolvent in the equity sense or unable to pay its debts as they became due. The trustee’s ability to recover the value of the transferred goods from the supplier is a remedy available for a voided transfer.

The scenario involves a business operating in Hawaii that has filed for Chapter 11 bankruptcy protection. A key aspect of Chapter 11 is the debtor’s ability to propose a plan of reorganization. Creditors are crucial stakeholders in this process, and their rights are protected by the Bankruptcy Code. Specifically, creditors are typically divided into classes for the purpose of voting on the plan. The Bankruptcy Code, at \(11 U.S.C. § 1129(a)(10)\), requires that for a plan to be confirmed, at least one class of impaired claims must accept the plan. If a class of claims is “impaired,” it means their legal, equitable, or contractual rights are altered by the plan. Unsecured creditors, such as trade creditors who have not provided collateral for their debts, generally form a class of unsecured claims. For a class to accept the plan, a majority in number and two-thirds in amount of the allowed claims in that class that vote on the plan must vote in favor. If a class of impaired creditors rejects the plan, the debtor may still seek confirmation under the “cramdown” provisions of \(11 U.S.C. § 1129(b)\), which requires that the plan be fair and equitable to the dissenting class. However, the question focuses on the initial hurdle for confirmation, which necessitates acceptance by at least one impaired class. Therefore, if the class of unsecured creditors is impaired and votes to accept the plan, this condition for confirmation under \(11 U.S.C. § 1129(a)(10)\) is met, assuming all other requirements of \(11 U.S.C. § 1129\) are also satisfied. The scenario does not provide information about secured creditors or equity holders, nor does it detail the specifics of the plan’s terms that might render other classes unimpaired or lead to a cramdown situation. The critical factor presented is the acceptance by an impaired class.

The question probes the application of Hawaii’s insolvency laws concerning preferential transfers, specifically focusing on the look-back period for transfers made to an insider. Under Hawaii Revised Statutes (HRS) § 651C-4(b)(1), a transfer is presumed to be for antecedent debt if it was made to an insider within one year before the commencement of insolvency proceedings. For transfers to non-insiders, the look-back period is generally 90 days under HRS § 651C-4(a)(1). An insider is defined broadly in HRS § 651C-2(a) and includes relatives, partners, officers, directors, and controlling persons of a debtor. In this scenario, Kaimana is a director of the debtor corporation, making him an insider. The transfer occurred on April 15, 2023, and the insolvency proceedings commenced on August 1, 2023. The period between these dates is approximately 3.5 months, which is less than one year. Therefore, the transfer to Kaimana, as an insider, falls within the one-year look-back period for preferential transfers. The trustee can seek to avoid this transfer as a preference under HRS § 651C-3(a) if the other elements of a preferential transfer are met, such as the debtor being insolvent at the time of the transfer and the transfer enabling Kaimana to receive more than he would have in a distribution of the debtor’s assets under the insolvency proceedings. The question specifically asks about the presumption of a preferential transfer for an insider, which is directly addressed by the one-year look-back period.

The scenario involves a debtor in Hawaii who has filed for Chapter 7 bankruptcy. The question pertains to the treatment of a pre-petition debt owed to a condominium association for unpaid assessments. Under Hawaii insolvency law, specifically as interpreted within the framework of the U.S. Bankruptcy Code, certain debts receive preferential treatment. Homeowners association (HOA) fees, or condominium association assessments, incurred within a specific period before the bankruptcy filing are often treated as priority unsecured claims or, in some jurisdictions, can be secured by a lien if the association has properly perfected one. However, the question specifies “unpaid assessments that accrued prior to the filing of the bankruptcy petition.” The Bankruptcy Code, in Section 507(a)(8)(E), provides for priority unsecured claims for certain amounts owed to governmental units. While condominium associations are typically private entities, Hawaii Revised Statutes § 514B-146(a) grants the association a lien on the unit for unpaid assessments. This lien is generally considered to be prior to other liens, except for those recorded prior to the assessment lien and certain tax liens. In a Chapter 7 liquidation, secured claims are paid first from the proceeds of the collateral. If the association has a valid lien under Hawaii law, it would be treated as a secured claim to the extent of the value of the unit. However, the question asks about the treatment of the debt itself, not necessarily the lien. The Bankruptcy Code also addresses the treatment of post-petition fees. For pre-petition fees, if the association has a perfected lien, it would be treated as a secured claim. If no lien is perfected, or if the debt exceeds the value of the collateral, the unsecured portion would be treated as a general unsecured claim. The specific wording “unpaid assessments that accrued prior to the filing” implies the entire pre-petition amount. Given the typical priority afforded to such assessments under state law and their treatment in bankruptcy, the most accurate classification for the entirety of the pre-petition debt, assuming the association can establish its lien rights, is as a secured claim to the extent of the value of the unit, and potentially a priority unsecured claim for certain portions if the lien is insufficient or not fully perfected under bankruptcy standards. However, the most common and direct treatment for a validly perfected assessment lien in Hawaii is as a secured claim. Therefore, the debt is treated as a secured claim to the extent of the value of the unit, and any remaining balance would be a general unsecured claim. The question asks for the treatment of the debt, and the secured nature is paramount if a lien exists.

In Hawaii, the determination of whether a debt is dischargeable in bankruptcy, particularly under Chapter 7, hinges on specific exceptions outlined in the U.S. Bankruptcy Code, which are applicable in all federal bankruptcy proceedings, including those filed in Hawaii. Section 523(a) of the Bankruptcy Code enumerates several categories of debts that are generally not dischargeable. Among these are debts for certain taxes, debts arising from fraud or defalcation while acting in a fiduciary capacity, debts for alimony, maintenance, or support, and debts for willful and malicious injury. When a creditor asserts that a debt falls into one of these non-dischargeable categories, the bankruptcy court must adjudicate this claim. The burden of proof typically rests with the creditor seeking to establish the non-dischargeability of the debt. For a debt to be deemed non-dischargeable due to willful and malicious injury, the creditor must demonstrate that the debtor acted with intent to cause harm and that the harm was a direct and foreseeable consequence of the debtor’s actions. This requires more than mere negligence or recklessness; it necessitates a showing of deliberate or intentional wrongdoing. Therefore, a debt arising from a debtor’s intentional act that foreseeably causes harm to another, even if the specific extent of the harm was not precisely intended, can be considered non-dischargeable under this exception.

The question concerns the priority of claims in a Hawaii insolvency proceeding, specifically focusing on the treatment of certain post-petition administrative expenses. In Hawaii, as in most U.S. jurisdictions, the Bankruptcy Code establishes a hierarchy for distributing assets to creditors. Administrative expenses incurred by a debtor after the commencement of a bankruptcy case are generally given high priority. However, the precise order among different types of administrative expenses can be complex. Section 507(a)(2) of the Bankruptcy Code, which is generally applicable in Hawaii’s bankruptcy proceedings, grants priority to unsecured claims for administrative expenses incurred by the estate after the order for relief. This includes wages, salaries, and commissions earned by employees after the petition date, as well as other necessary expenses of preserving the estate. When considering a scenario where a secured creditor’s collateral is used to fund these post-petition administrative expenses, a crucial concept is the “surcharge” provision, often found in Section 506(c) of the Bankruptcy Code. This provision allows the trustee to recover from the property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, protecting, or disposing of that property. The question implies that the secured creditor’s collateral was essential for generating the revenue that funded these post-petition administrative expenses. Therefore, the trustee, in seeking to pay these administrative expenses, would look to the value generated by the secured collateral, potentially by way of a surcharge under Section 506(c), to the extent those expenses were directly attributable to the preservation or disposition of that collateral. The remaining unsecured creditors, including the vendors for the specialized equipment, would typically be paid after secured creditors and priority unsecured creditors, according to their statutory priority, if any. However, the question specifically asks about the ability to recover these post-petition expenses from the secured creditor’s collateral. The correct answer hinges on the trustee’s ability to demonstrate that these expenses were necessary for the preservation or disposition of the secured collateral itself, thereby justifying a surcharge against that collateral under Section 506(c). This is distinct from general administrative expenses that might benefit the estate broadly but are not directly tied to the secured asset.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) significantly altered the landscape of consumer bankruptcy, particularly concerning the means test, which is designed to determine a debtor’s eligibility for Chapter 7 relief by assessing their income against the median income in their state and then scrutinizing disposable income. Hawaii, like all other U.S. states, is subject to these federal bankruptcy provisions. The means test, codified in 11 U.S. Code § 707(b), requires debtors to compare their income to the median income for a household of the same size in Hawaii. If their income is above the median, further analysis of their disposable income is performed to ascertain if they have the ability to repay a significant portion of their debts. The specific calculation involves comparing the debtor’s current monthly income over a six-month period prior to filing with the median income for a family of the same size in Hawaii. If the debtor’s income exceeds the applicable median, the debtor’s disposable income is calculated by subtracting allowed expenses from their current monthly income. Certain expenses are specifically enumerated in the Bankruptcy Code, such as housing, utilities, food, transportation, and taxes. The difference between income and these allowed expenses represents disposable income. A presumption of abuse arises if disposable income, when multiplied by 60, exceeds a certain threshold, typically \$10,000 or 25% of the debtor’s non-contingent, non-dischargeable debt, whichever is greater, though these figures can be adjusted for inflation. The purpose of the means test is to channel consumers who can afford to pay their debts into Chapter 13 reorganization rather than allowing them to discharge their debts through Chapter 7 liquidation. Understanding the statutory framework and the specific calculations required by the means test is crucial for both debtors and creditors in Hawaii.

The question concerns the priority of claims in a Hawaii insolvency proceeding, specifically focusing on the interplay between statutory liens and certain types of secured claims. In Hawaii, as in many jurisdictions, the Bankruptcy Code (which generally governs insolvency proceedings) establishes a hierarchy of claims. Secured claims, by definition, are those with a lien on specific property of the debtor. The Bankruptcy Code, particularly Section 506, addresses the treatment of secured claims. However, the priority of liens themselves is often determined by state law, and Hawaii has specific statutes that create and prioritize certain liens. For instance, Hawaii Revised Statutes (HRS) § 507-41 et seq. governs construction liens. If a contractor has perfected a valid construction lien under Hawaii law prior to the commencement of an insolvency proceeding, that lien generally attaches to the real property and gives the contractor a secured claim. This secured claim would typically have priority over unsecured claims and potentially over certain other types of claims depending on the specific circumstances and the perfection dates of other liens. In this scenario, the contractor’s claim, secured by a properly perfected construction lien under Hawaii law, is considered a secured claim. The question asks about the treatment of this claim in an insolvency proceeding. Secured claims are generally paid from the proceeds of the collateral securing them, up to the value of the collateral. If the value of the collateral is insufficient to cover the entire secured claim, the remaining portion is treated as an unsecured claim. However, the question implies the existence of a valid, perfected lien. Therefore, the contractor’s claim is a secured claim. The correct treatment is that it is a secured claim, to be paid from the proceeds of the collateral, subject to the value of that collateral. Other options present incorrect characterizations of the claim or its treatment. For example, classifying it as a priority unsecured claim or an administrative expense without further justification is incorrect, as its secured status is established by the perfected lien.

The question concerns the priority of claims in a Chapter 7 bankruptcy proceeding under Hawaii insolvency law, specifically focusing on the treatment of administrative expenses incurred post-petition but pre-conversion from Chapter 11 to Chapter 7. Hawaii law, like federal bankruptcy law, generally prioritizes administrative expenses. When a case converts from Chapter 11 to Chapter 7, expenses incurred in the Chapter 11 case that are allowable as administrative expenses under Section 503(b) of the Bankruptcy Code, and expenses incurred by a trustee in the Chapter 7 case, are typically afforded high priority. Section 507(a)(2) of the Bankruptcy Code grants priority to administrative expenses incurred in a case under Title 11. Section 507(a)(1) grants priority to administrative expenses incurred in any superseded prior case. Therefore, expenses from the Chapter 11 administration are generally considered administrative expenses of the converted Chapter 7 case and receive priority. However, the specific order of priority between different types of administrative expenses is crucial. In a converted case, expenses incurred by the Chapter 11 trustee or debtor-in-possession before conversion are generally treated as administrative expenses of the Chapter 7 estate. Furthermore, Section 507(a)(2) specifically addresses “administrative expenses allowed under section 503(b) of this title” in the case for which the order for relief was entered. In a converted case, the Chapter 11 expenses are considered expenses of the case for which the order for relief was entered. Therefore, they are entitled to priority under Section 507(a)(2). The question implies a comparison of priority between these post-petition, pre-conversion expenses and other types of claims. The priority of administrative expenses in a converted case is well-established. The key is understanding that these expenses retain their administrative status and priority. The scenario presents a situation where a business in Hawaii, initially operating under Chapter 11, is converted to Chapter 7. The business incurred significant expenses for its continued operation during the Chapter 11 period, which are allowable as administrative expenses. The question asks about the priority of these specific expenses relative to other claims. Under Hawaii insolvency law, which largely mirrors federal bankruptcy law, administrative expenses incurred during the Chapter 11 phase of a converted case are treated as administrative expenses of the Chapter 7 estate. These expenses are granted a high priority under Section 507(a)(2) of the U.S. Bankruptcy Code, which is applicable in Hawaii. This priority generally places them ahead of unsecured claims, and often ahead of certain other priority claims depending on the specific nature of those claims. The crucial concept is that these expenses, though incurred before the Chapter 7 filing, are treated as expenses of the Chapter 7 administration itself due to the conversion. Therefore, they receive the priority afforded to administrative expenses in a Chapter 7 case.

The question concerns the determination of the dischargeability of a debt arising from a breach of fiduciary duty in the context of a Hawaii insolvency proceeding. Under the U.S. Bankruptcy Code, specifically Section 523(a)(4), debts for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny are generally not dischargeable. Hawaii insolvency law, while primarily governed by federal bankruptcy law, operates within this framework. For a debt to be considered non-dischargeable under this section, three elements must be met: (1) the debtor must have been acting in a fiduciary capacity; (2) the debt must have arisen from fraud or defalcation; and (3) the fiduciary relationship must have existed prior to the creation of the debt or arose from the transaction that created the debt. In this scenario, Mr. Kai, as a trustee of a revocable living trust established under Hawaii law, clearly occupied a fiduciary capacity. The misappropriation of trust funds for personal use constitutes a defalcation while acting in that fiduciary capacity. Therefore, the debt owed to the trust beneficiaries for the misappropriated funds is a non-dischargeable debt under Section 523(a)(4) of the U.S. Bankruptcy Code. The specific amount of the misappropriation is \( \$75,000 \). This amount represents the extent of the debt arising from the breach of fiduciary duty.

In Hawaii insolvency law, particularly concerning the treatment of secured creditors in a bankruptcy proceeding, the concept of “adequate protection” is paramount when a debtor proposes to use, sell, or lease cash collateral or when a secured party is granted relief from the automatic stay. Hawaii, like other states, generally follows federal bankruptcy law principles. The Bankruptcy Code, specifically Section 361, outlines what constitutes adequate protection. This can take various forms, including periodic cash payments, an additional or replacement lien, or any other relief that provides the secured creditor with the indubitable equivalent of its interest in the property. The core idea is to ensure that the secured creditor’s interest does not diminish in value during the bankruptcy process. For instance, if a debtor wishes to continue operating a business that relies on equipment subject to a secured loan, the creditor may be entitled to payments to offset depreciation or the risk of non-payment. This isn’t about the debtor’s overall financial health but specifically about safeguarding the secured creditor’s collateral value. The phrase “indubitable equivalent” signifies a high standard, meaning the protection must be certain and undeniable. It’s not a matter of estimation but of concrete assurance. Therefore, any proposed protection must directly address and mitigate the potential erosion of the secured party’s economic position concerning the specific collateral.

The scenario involves a business operating in Hawaii that has filed for Chapter 11 bankruptcy protection. The question asks about the primary goal of the debtor in possession during the reorganization process under the U.S. Bankruptcy Code, as applied in Hawaii. The U.S. Bankruptcy Code, specifically Chapter 11, is designed to allow businesses to reorganize their debts and continue operations. The debtor in possession, which is the original management of the business operating under court supervision, aims to propose a plan of reorganization. This plan must outline how the debtor will restructure its debts, operations, and finances to become a viable entity. The fundamental objective is to achieve a successful reorganization, which typically involves paying creditors over time, preserving jobs, and continuing the business. While maximizing creditor recovery is a consideration within the plan, it is a means to the overarching goal of successful rehabilitation. Similarly, minimizing administrative costs and avoiding liquidation are important aspects of the process but are secondary to the core purpose of re-establishing the business on a sound financial footing. Therefore, the most accurate and encompassing primary goal is to emerge from bankruptcy as a reorganized entity.

The Hawaii Uniform Voidable Transactions Act (HUFTA), codified in Hawaii Revised Statutes Chapter 651C, provides a framework for creditors to recover assets transferred by a debtor that were made with the intent to hinder, delay, or defraud creditors, or for less than equivalent value when the debtor was insolvent or became insolvent as a result of the transfer. A transfer is deemed “fraudulent” under HUFTA if it is made with actual intent to hinder, delay, or defraud creditors, or if it is a transfer for which the debtor received less than a reasonably equivalent value in exchange for the transfer, and the debtor was insolvent at the time or became insolvent as a result of the transfer. In determining actual intent, courts consider several “badges of fraud,” which are circumstantial evidence suggesting fraudulent intent. These badges, as outlined in HRS § 651C-04(b), include factors such as the transfer or encumbrance of the asset being to an insider, the debtor retaining possession or control of the asset after the transfer, the transfer not being disclosed or being concealed, the transfer being made before or shortly after a substantial debt was incurred or a lawsuit was filed against the debtor, the asset being transferred having been substantially all of the debtor’s assets, the debtor absconding, the debtor removing or concealing the asset, the value of the consideration received being not reasonably equivalent to the value of the asset transferred, and the debtor being insolvent or becoming insolvent shortly after the transfer. In the given scenario, the transfer of the valuable beachfront property by Kaito to his brother, who is an insider, shortly after incurring a significant business debt and facing potential litigation, coupled with the retention of possession and control of the property by Kaito for his personal use, strongly suggests the presence of multiple badges of fraud, indicating an actual fraudulent transfer under HUFTA. The transfer was not for reasonably equivalent value, as Kaito received only nominal consideration, and it was made when Kaito was likely facing financial distress. Therefore, a creditor would likely succeed in avoiding this transfer.

In Hawaii insolvency law, specifically concerning the administration of a deceased individual’s insolvent estate, the priority of claims is a critical aspect governed by Hawaii Revised Statutes (HRS) Chapter 560, the Hawaii Probate Code, and related statutes. When an estate is determined to be insolvent, meaning the value of the decedent’s assets is insufficient to cover all debts and expenses, the distribution of available assets follows a strict statutory hierarchy. This hierarchy ensures that certain creditors and expenses are paid before others. The general order of priority for claims against an insolvent estate in Hawaii is as follows: 1. **Expenses of administration:** These are the costs incurred in managing and settling the estate, such as court costs, attorney fees, executor fees, and appraisal fees. These are considered paramount to ensure the orderly winding up of the estate. 2. **Family allowances:** Under HRS § 560:2-402, certain allowances may be made for the surviving spouse and minor children, even if the estate is insolvent. These are statutory entitlements designed to provide immediate support. 3. **Funeral and burial expenses:** Reasonable expenses for the decedent’s funeral and burial are given high priority. 4. **Homestead allowance:** If applicable, a homestead allowance for the surviving spouse or minor children may be prioritized. 5. **Debts and taxes with statutory priority:** This category includes federal and state taxes (like income tax and estate tax), and debts owed to the state or county governments that have a statutory lien or priority. 6. **All other claims:** This encompasses general unsecured creditors, such as credit card companies, medical bills not covered by insurance, and other contractual debts. The question specifically asks about the relative priority between the fees of the personal representative and a claim for unpaid state income taxes. According to the established hierarchy, expenses of administration, which include the personal representative’s fees, are typically prioritized above all other claims, including taxes, except for certain allowances for the surviving family. Therefore, the personal representative’s fees would generally be paid before the state income tax claim.

The scenario involves a debtor in Hawaii who has filed for Chapter 7 bankruptcy. The question concerns the treatment of a homestead exemption under Hawaii law when the debtor has owned the property for less than 1,215 days prior to filing. Hawaii Revised Statutes (HRS) § 651-91.5(a) allows a debtor to exempt the principal residence from the bankruptcy estate, but this exemption is subject to certain limitations. Specifically, if the debtor acquired the principal residence within 1,215 days before the filing of the bankruptcy petition, the exemption is limited to a maximum of \( \$125,000 \). In this case, Kai acquired the property 900 days before filing. Therefore, the homestead exemption available to Kai is capped at \( \$125,000 \), regardless of the actual equity in the property or the general unlimited homestead exemption that might apply if the 1,215-day period had been met. This limitation is a specific provision within Hawaii’s exemption statutes designed to prevent debtors from purchasing a new home shortly before bankruptcy solely to utilize a generous homestead exemption. The calculation is straightforward: the acquisition period (900 days) is less than the statutory threshold (1,215 days), triggering the \( \$125,000 \) cap.

In Hawaii, the Uniform Voidable Transactions Act (UVTA), codified in Hawaii Revised Statutes Chapter 651C, governs the avoidance of certain transactions that are detrimental to creditors. A transfer made or obligation incurred by a debtor is voidable if it was made with the intent to hinder, delay, or defraud creditors. This is known as a fraudulent transfer. Under HRS § 651C-04(a)(1), a transfer is presumed to be fraudulent if the debtor received less than a reasonably equivalent value in exchange for the transfer and the debtor was insolvent at the time or became insolvent as a result of the transfer. However, the UVTA also addresses actual fraud, where intent is the primary focus, regardless of whether reasonably equivalent value was exchanged. HRS § 651C-04(a)(1) specifically addresses transfers made with “actual intent to hinder, delay, or defraud any creditor.” When evaluating actual intent, courts consider several factors, often referred to as “badges of fraud,” which are circumstantial evidence suggesting fraudulent intent. These badges are not exhaustive but provide guidance. Examples include the transfer or encumbrance of substantially all of the debtor’s assets, the debtor’s retention of possession or control of the property transferred, the transfer made after a substantial debt was incurred or while the debtor was insolvent, the transfer made to an insider, the debtor’s concealment of the transfer, and the transfer for a value that was not reasonably equivalent. In the scenario presented, the transfer of the beachfront property by Mr. Kalani to his cousin, Ms. Leilani, for a significantly undervalued amount, coupled with Mr. Kalani’s known inability to meet his substantial business debts and his subsequent filing for bankruptcy, strongly indicates actual intent to defraud creditors. The undervaluation is a significant badge of fraud, and when combined with the timing relative to his financial distress and the transfer to an insider (a cousin), it points towards a fraudulent conveyance under HRS § 651C-04(a)(1). The bankruptcy trustee, acting on behalf of the creditors, would have the standing to seek avoidance of this transfer. The trustee’s ability to recover the property or its value is contingent on proving the fraudulent intent or the constructive fraud elements under the UVTA. The key here is the intent, which is often inferred from the circumstances.

The question concerns the priority of claims in a Hawaii insolvency proceeding, specifically focusing on the treatment of a secured creditor’s claim where the collateral’s value is less than the outstanding debt. In Hawaii, as in most U.S. jurisdictions, secured creditors are entitled to the value of their collateral. If the collateral’s value is insufficient to cover the entire secured debt, the remaining unsecured portion of the debt is treated as a general unsecured claim. The Hawaii Revised Statutes (HRS) Chapter 651, concerning insolvency, and related federal bankruptcy principles, which often inform state insolvency law, dictate this treatment. The secured creditor has a right to the value of the collateral, which is \( \$75,000 \). The total debt owed to the creditor is \( \$120,000 \). Therefore, \( \$120,000 – \$75,000 = \$45,000 \) of the debt becomes an unsecured claim. Unsecured claims are generally paid pro rata from the remaining assets after priority claims (like administrative expenses and certain taxes) and secured claims (to the extent of collateral value) are satisfied. In this scenario, the creditor will receive \( \$75,000 \) as a secured claim. The remaining \( \$45,000 \) will be treated as a general unsecured claim. The question asks about the creditor’s rights regarding the entire debt. The creditor is secured up to the value of the collateral, and the remainder is unsecured. Therefore, the creditor has a secured claim for \( \$75,000 \) and an unsecured claim for \( \$45,000 \).

Hawaii Revised Statutes Chapter 654, concerning assignments for the benefit of creditors, outlines a process for an insolvent debtor to transfer property to an assignee for distribution to creditors. A key aspect of this statute is the requirement for the debtor to provide a schedule of assets and liabilities, along with a list of creditors, under oath. The assignee then takes possession of the assigned property and administers it for the benefit of all creditors. This process is distinct from federal bankruptcy proceedings, offering an alternative state-level mechanism for debt resolution. The statute emphasizes fairness in the distribution of assets among creditors, aiming to prevent preferential treatment. Unlike some other states that may have more complex or varied assignment laws, Hawaii’s statute provides a relatively straightforward framework for voluntary assignments. The assignee’s duties include inventorying the assets, notifying creditors, and ultimately distributing the proceeds from the sale of assets. This mechanism is intended to provide a more efficient and less costly alternative to formal bankruptcy for certain debtors. The debtor’s full disclosure and cooperation are crucial for the successful administration of the assignment.

The scenario involves a business operating in Hawaii that has encountered severe financial distress, leading to a potential insolvency. The question focuses on the procedural implications of initiating a voluntary dissolution under Hawaii Revised Statutes (HRS) Chapter 607, which governs insolvency proceedings, specifically in relation to the rights of secured creditors. A secured creditor, such as a bank holding a mortgage on the business’s primary asset, possesses a lien on that asset. Under HRS § 607-3, a secured creditor’s lien generally survives a voluntary dissolution unless the debt is paid or the creditor consents to its extinguishment. The dissolution process, while initiated by the business, does not automatically nullify the secured creditor’s rights. The creditor retains the right to foreclose on the collateral to satisfy the debt. The business, in its dissolution, must either arrange to pay the secured debt, negotiate a release of the collateral with the creditor, or the creditor will likely pursue their remedies against the collateral. Therefore, the secured creditor’s lien remains a critical factor that must be addressed during the dissolution process, and the creditor’s rights are not automatically extinguished by the filing of a voluntary dissolution. The other options are incorrect because while a court may oversee certain aspects of dissolution, the secured creditor’s rights are primarily governed by the security agreement and applicable lien laws, not solely by the business’s decision to dissolve. A general notice to creditors is a procedural step, but it doesn’t extinguish a secured lien without satisfaction or agreement. The appointment of a receiver is a possibility in insolvency but not an automatic consequence of voluntary dissolution and the secured creditor’s rights exist independently of such an appointment.

Hawaii Revised Statutes (HRS) Chapter 651D governs the assignment of rights to future payments. Specifically, HRS § 651D-2(a) establishes that the assignment of rights to future payments arising from a personal injury settlement, judgment, or award is generally permissible, provided certain conditions are met. These conditions are designed to protect the assignor from undue hardship and ensure the transaction is fair. One crucial aspect of these statutes, particularly relevant in the context of insolvency, is the definition of “future payments” and the limitations on what can be assigned. While HRS § 651D-2(b) permits the assignment of rights to future payments, it also contains exceptions and limitations. For instance, it generally prohibits the assignment of payments that are intended to compensate for future medical expenses or lost future earnings, as these are considered essential for the ongoing well-being and livelihood of the injured party. In an insolvency proceeding, the trustee or debtor-in-possession must carefully evaluate any proposed assignment of future payments to ensure compliance with HRS Chapter 651D. Failure to adhere to these provisions can render the assignment void or subject to avoidance as a fraudulent transfer or preferential payment, depending on the specific circumstances and the timing relative to the insolvency filing. The purpose of these limitations is to prevent individuals from divesting themselves of essential future resources, which could exacerbate their financial distress and hinder their rehabilitation, a core principle in insolvency law. Therefore, when assessing the validity of such assignments in Hawaii, a key consideration is whether the assigned payments fall within the statutory exceptions designed to safeguard the debtor’s future needs.