Hawaii bankruptcy filings are beginning to reflect slowing growth in the state economy and are now on pace to exceed last year’s total.
The number of cases in October hit its second- highest level of the year in rising for the third straight month, according to data released Wednesday by the U.S. Bankruptcy Court, District of Hawaii.
Filings increased 7.1 percent to 135 from 126 in the year-earlier period to mark the sixth time in 10 months this year that they have exceeded the year-earlier total. Only the 138 bankruptcies in August topped last month’s number.
Island Air’s Chapter 11 reorganization filing was the most high-profile bankruptcy filed during the month.
The increasing number of bankruptcies appears to be reversing a downward trend that saw them fall for six straight years and be flat or down from the year-earlier period for 69 of the past 79 months.
Through the first 10 months of this year, there were 1,154 cases compared with 1,171 during the same period in 2016. At that pace there will be 1,385 bankruptcy cases this year, which would be slightly more than the 1,382 filed in 2016. Even though the number of filings through October this year is still less than last year at this time, the average number of filings dropped off over the last two months of 2016. Without a similar drop-off, the 2017 filings would exceed last year’s total.
“This (recent downward trend) is an indication that we probably hit the bottom with this roughly 1,400 case number, and the number of filings has nowhere to go but up,” said Honolulu bankruptcy attorney Blake Goodman.
SEEKING RELIEFBankruptcy filings in October rose from a year ago.
Chapter 7: Liquidation
2017: 84 | 2016: 76 | Percent Change: 10.5%
Chapter 11: Business Reorganization
2017: 2 | 2016: 0 | Percent Change: –%
Chapter 13: Individuals with regular sources of income set up plans to pay creditors over time
2017: 49 | 2016: 50 | Percent Change: -2%
Total | 135 | 126 | 7.1%
Source: U.S. Bankruptcy Court, District of Hawaii
Bankruptcies are considered a lagging indicator by economists because individuals or companies typically file when they have exhausted all other possibilities to remain financially viable. That may be the case now in the wake of recent reports by state and University of Hawaii economists that forecast slowing growth for the islands.
“I’m seeing the same kind of cases come across my desk, which is a percentage of unemployed individuals and a percentage of individuals who are just frustrated with their debt load and are facing one more month of not being able to make ends meet,” Goodman said. “Borrowing levels are going up and the debt load of consumers — like for vehicle financing and credit card delinquencies — those numbers are starting to creep up on a nationwide basis as greater consumer confidence is allowing consumers to finance more jewelry, cars, electronics and trips.”
In last month’s filings, Chapter 7 liquidation — the most common type of bankruptcy — rose 10.5 percent, to 84 from 76 in the year-earlier period.
Chapter 13 filings, which allow individuals with regular sources of income to set up plans to make installment payments to creditors over three to five years, dipped to 49 from 50.
And Chapter 11 filings, including the one by Island Air, numbered two last month compared with none in the year-earlier period. Chapter 11 filings typically involve businesses, although the other Chapter 11 filing in October involved an individual.
Across the state, the number of cases was mixed among the four major counties. Honolulu County filings increased to 96 from 84, and Maui County filings rose to 24 from 19. Hawaii County filings fell to 12 from 17 and Kauai County filings were cut in half to three from six.
