Bankruptcy cases fall in Hawaii despite economic hardship

Hawaii’s slowing economy apparently isn’t leading to an influx of bankruptcy filings.

The number of cases in August plunged 22.7% to 109 from 141 in the year-earlier period even though individuals no longer have additional $600-a-week federal stimulus payments and more local businesses are closing as customers slow to a trickle.

Through eight months, bankruptcy filings were down 7.7% to 1,024 from 1,110, according to new data from the U.S. Bankruptcy Court, District of Hawaii.

The number of cases has now been down six of the eight months this year, much to the surprise of those who follow bankruptcies.

“I don’t know why the cases are down,” Honolulu bankruptcy attorney Greg Dunn said. “All I can tell from my perspective is we seem to be getting more bankruptcies. I don’t know if everybody’s coming to me or what. Maybe I’m taking away from the competition. It seems like we’re constantly working seven days a week.”

With the federal court closed for in-person hearings, bankruptcy cases are being conducted by teleconference.

“Most of my clients like hearings on the telephone,” Dunn said. “No one likes to show up for a court hearing. I like it because I get to stay in my office and don’t have to dress up. We’re working with a few people with COVID, and we’re trying to do everything with email or phone appointments. There is also a lockdown now, too, and people feel they can’t come out, but they can still call us.”

The decline in bankruptcies also is surprising to Eugene Tian, chief economist at the state Department of Business, Economic Development and Tourism.

“It was kind of a surprise (that bankruptcies were down last month) because the August number for initial unemployment claims for the economy was not as good as July or June due to the end of the PPP (Paycheck Protection Program) money and the end of federal assistance on unemployment insurance,” Tian said. “Initial unemployment claims actually increased last week. It had been under 6,000 for five weeks and then increased to above 6,000.”

Tian said bankruptcy numbers should slightly increase if the numbers are consistent with other economic indicators.

“It may be that people are still hoping for more federal money, and the state has allocated money for helping people pay rent and their mortgages,” he said.

Dunn said he has a stack of cases he’s working on that haven’t been filed yet and expects the overall bankruptcy numbers to increase over the next few months. He said there’s still undoubtedly a number of people who are reluctant to pull the trigger and file for bankruptcy.

“I don’t know how people are making it, but I guess they’re stretching it,” he said.

In July, Chapter 7 liquidation filings — the most common type of bankruptcy — fell 11.9% to 74 from 84 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, plunged 38.2% to 34 from 55.

There were no Chapter 11 reorganization filings last month, compared with two in the year-earlier period. There also was one Chapter 15 case last month, involving a foreign debtor filing in the U.S.

Bankruptcies were mixed in the four major counties. Honolulu County filings fell to 79 from 110, and Kauai County filings slipped to two from four. Hawaii County filings remained at 10 while Maui County filings edged up to 18 from 17.

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Bankruptcy filings in August fell from a year ago.

2020 2019 PCT. CHANGE

Chapter 7 74 84 -11.9%

Liquidation

Chapter 11 0 2 —

Business reorganization

Chapter 15 1 0 —

A foreign debtor files in the U.S.

Chapter 13 34 55 -38.2%

Individuals with regular sources of income set up plans to pay creditors over time

Total 109 141 -22.7%

Source: U.S. Bankruptcy Court, District of Hawaii