Bankruptcies in isles decline by 34 percent

The number of Hawaii bankruptcy filings fell 34 percent in May, the sharpest decline in more than five years.

The 219 cases filed in May was down from 334 cases filed the same month a year earlier, according to data compiled by U.S. Bankruptcy Court. It marked the largest year-over-year decline since October 2006, when filings fell by 94 percent.

Bankruptcy filings in Hawaii have been trending lower since averaging 330 a month during the recent peak in 2010. Bankruptcy filings averaged 235 a month for the first five months of 2012, down from an average of 277 a month in 2011.

David Farmer, one of four federal bankruptcy court trustees operating in the District of Hawaii, said although the volume of cases remains steady, he’s noticed that the pace of filings has eased over the past year.

"Our meetings with filers used to take a full day, and now we’re concluding them by noontime. The cases are simpler and fewer," Farmer said. The gradually improving economy and firming of the job market could be factors, he added.

However, some of the slowdown in bankruptcies is probably due to a change in state law that makes it more difficult for lenders to foreclose on homeowners who have defaulted on their mortgages, Farmer said. That has eased the pressure on delinquent borrowers who previously would have filed for bankruptcy to prevent a lender from repossessing their home.

"The latest tinkering by the Legislature has created a backlog of foreclosures that I think is going to continue," he said.

Still, the three reasons individuals file for bankruptcy continue to be divorce, loss of job and high medical bills, according to Farmer.

Bankruptcies fell in all counties. In Hono­lulu County the number of cases fell to 135 in May, a 32.5 percent drop from 200 the same month last year.

Filings fell to 41 in Maui County, a 45.3 percent decline from 75 filings in May 2011. In Hawaii County, filings fell 26.2 percent to 31 cases, and in Kauai County they fell 29.4 percent to 12 cases.

The drop in bankruptcy filings in Hawaii has been accompanied by declining credit card debt. The most recent data by credit-scoring website CreditKarma.com showed that average credit card debt in Hawaii dropped 4.2 percent in April to $7,090, compared with the same month in 2011. CreditKarma.com also reported that Hawaii residents on average have the third-highest credit scores in the country with an average score of 678, third in the nation behind New Jersey and Massachusetts.