Monthly bankruptcies dropped during August

Hawaii bankruptcies continued their downward trend in August, but attorney Ed Magauran is starting to see red flags despite healthy growth in the state economy.

“Look at the stock market the last few days,” Magauran said. “The economy doesn’t seem to be as healthy as it was even a week ago. We are not short of calls. We are not short of people needing debt relief. But when the numbers will rise, I don’t know.”

Statewide bankruptcies continued their long descent last month as they fell 13.1 percent to 119 from 137 in the year-earlier period, according to data released Tuesday by U.S. Bankruptcy Court, District of Hawaii. It was the 53rd straight month that bankruptcies have been flat or down from the year-earlier period, and it was the lowest monthly total since 117 cases were filed in January.

Through the first eight months of this year, there have been 1,065 filings, an average of 133 a month. At that pace the state is on track this year to see about 1,596 filings, which would represent the lowest total since 1,381 were filed in 2007.

Certainly, the economy appears to be healthy, with visitor arrivals and spending on pace for their fourth straight record year, hotels setting monthly records for room rates and revenue, and unemployment at a seven-year low of 3.7 percent.

But as much as the economy may be helping some people, Magauran said he’s still fielding calls from others in need of financial relief.

“There’s divorce, there’s death, there’s lost jobs, there’s cut hours and there’s collection activity with people being sued to collect on their debts, and they don’t have the money,” Magauran said. “It’s often the case that people will have truly unmanageable debt but they won’t do anything about it until they’re pushed. And by pushed I mean an aggressive collection agency, or the creditor brings a lawsuit.”

Magauran said people often wait until they’re “severely distressed” before calling a bankruptcy attorney.

“Frankly, it’s often a blessing in disguise for people who come from that situation — having been living with unmanageable debt for an extended period of time,” he said. “They come in for relief from a particular claim, and they leave being free of all of their debt, and they are relieved.”

Last month Chapter 7 liquidation — the most common type of bankruptcy — fell 7.6 percent to 85 from 92 a year ago. Chapter 13 filings, which allow individuals with regular sources of income to set up plans to pay creditors over time, fell 25 percent to 33 from 44 a year ago. There was one Chapter 11 case, matching the same number in the year-earlier period. Chapter 11 filings allow businesses to reorganize.

Overall, bankruptcies fell in three of the four counties last month. Hono­­­lulu County bankruptcies dipped to 86 from 89, Hawaii County filings declined to eight from 15 and Maui County filings fell to 19 from 28. In Kauai County, filings ticked up to six from five.