Nearly a year ago, with COVID-19 cases surging nationwide, Honolulu bankruptcy attorney Greg Dunn forewarned that Hawaii should brace itself for “the mother of all recessions.”
This week Dunn said he’s going to get out of the prediction business.
Statewide bankruptcies in February fell below 100 for the second month in a row and plunged 32.4% from the same time a year ago, according to new data released by the U.S. Bankruptcy Court, District of Hawaii. There were only 92 cases last month, compared with 136 in February 2020. In January there were just 91 filings. The last time bankruptcy cases dropped below 100 prior to this year was in 2017 when there were three months when filings were in the 90s.
“It’s difficult to say what’s going to happen the rest of the year, because I thought last year would be the ‘mother of all recessions,’” Dunn said. “I was wrong and that’s fine, and I don’t want to predict again what’s going to happen. I’m not making any predictions this year.”
Dunn said that in April when he made the prediction, he didn’t factor in the abundance of financial aid.
“I didn’t know that the government would provide so much financial support for people, and so it didn’t work out the way I predicted,” he said. “So in a way it’s good that people didn’t have to file for bankruptcy. But the debt still accumulated, and the creditors gave people a break and didn’t pursue people that much. There was a foreclosure moratorium and a rental moratorium to keep the creditors off the people’s backs. We don’t know how far it’s going to go this year. I think they’re still going to provide substantial support for people, but I don’t know how much. So that may definitely play a part on how bankruptcies go this year.”
Dunn said despite financial stimulus, unemployment compensation and payment deferrals, there are many people still struggling.
“I still see the same problems,” he said. “People aren’t making that much money these days. A lot of them are underemployed or unemployed, and they haven’t been able to get as much money as they need from the government. So these people have to turn to bankruptcy if they’re working and trying to protect their checks from getting garnished.”
In February, Chapter 7 liquidation filings — the most common type of bankruptcy — fell 28.4% to 63 from 88 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 56.3% to 21 from 48.
There were eight Chapter 11 filings last month — compared with none a year earlier — which all came from Pacific Links US Holdings Inc. and seven affiliates. Chapter 11 filings are primarily for business reorganization.
The affiliates collectively owned 644 acres of development property in Makaha Valley and — with help from golf legend Tiger Woods — was trying to establish a new resort in Makaha Valley as part of a joint venture with local real estate developer Stanford Carr.
But the company, which has leadership ties to China and a Canadian parent that sells memberships for play at over 500 participating golf courses worldwide to customers largely in China, said it experienced geopolitical troubles in recent years getting money out of China to realize its plan for Makaha Valley.
Then the coronavirus pandemic hit last year and exacerbated difficulties for parent Pacific Links International.
Two foreclosure lawsuits involving Makaha Valley were pending against Pacific Links US when it filed bankruptcy in Honolulu.
Around the state, bankruptcies fell in two of the four major counties last month. Honolulu County filings decreased to 69 from 99, and Hawaii County filings declined to three from 22. Maui County filings rose to 15 from 12, and Kauai County filings edged up to five from three.
Bankruptcy filings in February fell from a year ago.
2020 2019 PCT. CHANGE
Chapter 7 63 88 -28.4%
Chapter 11 8 0 —
Chapter 13 21 48 -56.3%
Individuals with regular sources of income set up plans to pay creditors over time
Total 92 136 -32.4%
Source: U.S. Bankruptcy Court, District of Hawaii