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Consumer aid, vaccines keep state bankruptcies declining

Statewide bankruptcies in March declined 4.3% to 135 from 141 in the year- earlier period, according to new data released by the U.S. Bankruptcy Court, District of Hawaii. Through the first quarter of the year, filings are down 20% to 318 from 398 at the same time a year ago.

“In general, I believe Hawaii residents have dodged the ‘bankruptcy bullet,’ at least for now,” Honolulu bankruptcy attorney Greg Dunn said.

Hawaii consumers affected by the COVID-19 pandemic have been propped up by continued substantial government and social programs like state and federal unemployment compensation, Pandemic Unemployment Assistance, food stamps, welfare assistance, rental or mortgage assistance programs, mortgage forbearances offered by the mortgage companies, and the federal stimulus money assistance, according to Dunn.

“The main question is, How long will these programs continue?” Dunn asked. “There are a lot of people out there that are not paying their debts fully because they are making much less money. People are recovering, but their debts are still there and growing, and at some point bankruptcies will see another surge.”

“The creditors are getting more impatient and will expect people to start paying more,” he said. “In my bankruptcy law practice, I am beginning to see more people calling and wanting debt relief.”

State economist Eugene Tian, however, expects bankruptcies to remain low this year due to the $1.9 trillion American Rescue Plan and an influx of vaccinations.

“Hawaii is expected to receive about $7 billion in federal funds out of $1.9 trillion from the American Rescue Plan,” he said. “The money will help Hawaii firms and households stay in business.”

In addition, he said, “with the increase in the vaccination rate, the economic recovery is going to accelerate, especially during the second half of this year.”

Still, Hawaii’s unemployment rate of 9.2% in February remains the highest in the nation and could remain for the foreseeable future at an elevated level, according to Tian, chief economist for the state Department of Business, Economic Development and Tourism.

“Though most of Hawaii businesses are now open for business, many of them are only partially open,” he said. “Many of the jobs are waiting to be called back. The economy will take a few years to full recovery, and unemployment rate in Hawaii will remain high in the next few years.”

In March, Chapter 7 liquidation filings — the most common type of bankruptcy — decreased 5.7% to 100 from 106 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, ticked up to 35 from 34.

There were no Chapter 11 filings last month or in the year-earlier period. Chapter 11 filings are primarily for business reorganization.

But there was one Chapter 15 filing in March 2020. Chapter 15 filings allow foreign debtors to file in the U.S.

Around the state, bankruptcies were mixed in the four major counties last month. Honolulu County filings ticked up to 101 from 100, and Hawaii County filings rose to 13 from 10. Maui County filings fell to 17 from 24, and Kauai County filings dropped to four from seven.

SEEKING RELIEF

Bankruptcy filings in March fell from a year ago.

2021 2020 PCT. CHANGE

Chapter 7 100 106 -5.7%

Liquidation

Chapter 11 0 0 —

Business reorganization

Chapter 15 0 1 —

Allows foreign debtor to file

Chapter 13 35 34 2.9%

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

Total 135 141 -4.3%

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

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