The anticipated increase in Hawaii bankruptcies finally might be emerging as the state’s extended tourism lockdown and severe unemployment crisis take their toll.
Bankruptcy cases in June jumped 21.8% to 151 from 124 in the year-ago period to reach their highest monthly total this year and end a decline of four straight months, according to new data released by the U.S. Bankruptcy Court, District of Hawaii. The 151 cases were up nearly 35% from May and were the most since there were 162 filings in October last year.
Economists and bankruptcy attorneys had been projecting an increase, but the numbers had been muted due to federal aid programs and unemployment benefits that were keeping individuals and businesses from going under.
“It’s definitely going up,” Honolulu bankruptcy attorney Greg Dunn said Tuesday. “I think I had about 30 of those 151 cases in June, if not more.”
Dunn said he expects the pace of filings to keep increasing and is pessimistic for the remainder of the year as the COVID-19 pandemic persists.
“With the federal unemployment compensation (of $600 a week) being terminated at the end of the month, unless there’s any federal assistance or state government assistance, it may get worse in Hawaii because there’s still a lockdown,” he said. “There’s still a lot of people not working.”
He said the one-time federal stimulus check of $1,200 for eligible individuals and $2,400 for eligible married couples was short-lived.
“That stimulus check everybody was getting can only go so far,” he said. “You pay your rent and you’re done with it. Hawaii is so dependent on the tourism industry, and that’s not even opening up now. It doesn’t look good for the rest of the year.”
Dunn said it’s uncertain what’s going to happen to people after the $600 additional weekly unemployment payment expires on July 25.
“There’s not going to be enough money for people to pay their expenses,” he said.
He said anxiety levels are rising, and by the time people come to see him, they view filing for bankruptcy as a last resort.
“A lot of them are nervous wrecks right now, especially now that the federal unemployment compensation is going to be terminated,” he said. “They don’t know where the money is going to come from next. This lady I was just talking to was getting $863 a week from the state and federal unemployment and on July 25 her weekly unemployment will go down $600. So that’s only going to leave her $263 a week so she’s a nervous wreck. The only thing she’ll be able to rely on is help from her family.”
Federal aid programs and the additional $600 weekly unemployment payment that helped keep businesses and individuals afloat through the first few months of this year resulted in bankruptcies being down 6.3% at midyear from the same time in 2019.
But while some people made more money through unemployment thanks to the $600 weekly federal unemployment benefit, others made less than before.
“I’m seeing people who own homes because the unemployment payments are still not enough for them,” he said. “When they were working, they were making more money. The unemployment benefit from the federal government is not enough for a homeowner in many cases.”
In June, Chapter 7 liquidation filings — the most common type of bankruptcy — soared 50.6% to 128 from 85 in the year-earlier period. It was the most Chapter 7 filings in any month since there were 136 in August 2013.
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, declined 43.6% to 22 from 39.
There was one Chapter 11 reorganization filing last month compared with none in the year-earlier period.
Bankruptcies rose in all of the four major counties. Honolulu County filings rose to 107 from 95, Hawaii County filings increased to 14 from five, Maui County filings rose to 24 from 21 and Kauai County filings doubled to six from three.
Bankruptcy filings in June rose from a year ago.
2020 2019 PCT. CHANGE
Chapter 7 128 85 50.6%
Chapter 11 1 0 —
Chapter 13 22 39 -43.6%
Individuals with regular sources of income set up plans to pay creditors over time
Total 151 124 21.8%
Source: U.S. Bankruptcy Court, District of Hawaii