Isle bankruptcies keep rising despite economic growth

Hawaii’s long-running streak of annual declining bankruptcies may be coming to an end.

Statewide filings in May soared 10.5 percent to mark the fourth time in five months they have exceeded the previous year’s total, according to data released Friday by the U.S. Bankruptcy Court, District of Hawaii. There were 126 filings last month compared with 114 in the year-earlier period.

Following on the heels of April’s 60.6 percent rise, the 615 cases filed so far this year are now up 75 from the same time period in 2017.

Ironically, bankruptcy cases have been picking up at the same time that growth in the tourism-led economy appears to be accelerating. If the bankruptcy trend holds, it will end a streak of seven straight years of declines.

“I’m doing 36 percent more cases than a year ago,” Honolulu bankruptcy attorney Greg Dunn said. “I’m working a lot right now. The economy seems to be stronger in Hawaii, and people probably are spending more and overextending themselves. So I think that’s maybe causing more bankruptcies. I see more people eating at restaurants and spending more money these days, so they must be getting into more debt again.”

Dunn said 65 percent of his cases are Chapter 7 liquidation, the most common type of bankruptcy. He said in an average Chapter 7 case, the individual or couple filing might have between $25,000 and $75,000 in unsecured debt like credit cards and unsecured loans.

He said the remaining 35 percent of his loans are for Chapter 13, which allow individuals with regular sources of income to set up plans to make installment payments to creditors over three to five years.

“We’re doing a lot of Chapter 13 cases that we use for foreclosure defense to help people save homes,” he said.

In May, Chapter 7 cases statewide actually fell 9.2 percent to 79 from 87 in the year-earlier period. For the year, though, they are up 9.2 percent — the exact opposite of May’s decline.

Chapter 13 filings jumped 80.8 percent last month to 47 from 26, and for the year are up 26.6 percent.

There were no Chapter 11 filings last month and just one in May 2017. Chapter 11 filings typically involve business reorganization.

Across the state, the number of cases rose in three of the four major counties from the year-earlier period. Honolulu County filings inched up to 80 from 79, Hawaii County filings increased to 14 from seven and Kauai County filings rose to 15 from 10. Maui County filings slipped to 17 from 18.