Statewide bankruptcies rose for the first time this year as filings in April jumped 19.3% even as the state continued to show encouraging signs of an economic recovery.
The 136 cases were the most for any month since there were 140 in July, according to new data released by the U.S. Bankruptcy Court, District of Hawaii. There were only 114 cases in April 2020.
Through the first four months of 2021, bankruptcies are down 11.3% to 454 from 512 in the year-ago period as they stay on pace to decline for the second year in a row.
However, Honolulu bankruptcy attorney Greg Dunn expects cases to increase in 2021 as people return to work with debt still hanging over their heads.
“The rise in bankruptcies does not surprise me,” said Dunn, who said cases for his office alone are up 54% from a year ago. “The number of people hiring me are motivated to do bankruptcies because many of them are now being sued, and the creditors are more aggressive in collecting on their delinquent claims as people are beginning to go back to work. I don’t foresee creditors slowing down from their collection activities. So this could be a sign that bankruptcies may be on the rise regardless of Hawaii’s recovery.”
State economist Eugene Tian pointed out, though, that the 136 bankruptcy cases are still relatively low compared with the 156 filed in April 2019. Last month’s cases are also below the more than 200 filings each April for the years 2009 to 2013 at the end of the last recession and its aftermath, Tian said.
“With the COVID-19 pandemic lasting so long, it is expected that bankruptcy filings will increase slowly,” said Tian, chief economist with the state Department of Business, Economic Development and Tourism. “Economic recovery is a slow process and may take a few years to recover to the pre-COVID level. We may see more bankruptcy filings in the near future, but it will be far below the level of the 2009 recession. This is because the economy is getting better and about $7 billion in federal funds has been allocated, or is in the process of being allocated, to Hawaii this year.”
Still, Tian said the damage from the pandemic may be too much to overcome for some people.
“People have been waiting for too long, and some businesses and individuals have reached their limit and need to cease operation,” he said.
Tian said Hawaii’s economy, especially tourism, is performing better than economists expected at the beginning of the year.
“Visitor arrivals in April reached 62% of the April 2019 level, and during the first 10 days of May, arrivals were at 66% of the May 2019 level,” he said. “At the beginning of the year, we expected that visitor arrivals would reach 50% of the 2019 level by the end of June.”
Tian noted that the Hawaii Commercial Rent Survey conducted in March found that 92% of Hawaii businesses were open, with 6.3% temporarily closed and 1.8% permanently closed.
“The 1.8% permanently closed businesses can be translated into about 600 businesses that might be filing for bankruptcy, still a low number compared with the last recession,” he said.
In April, Chapter 7 liquidation filings — the most common type of bankruptcy — increased 22.1% to 94 from 77 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, rose 13.5% to 42 from 37.
There were no Chapter 11 filings last month or in the year-earlier period. Chapter 11 filings are primarily for business reorganization.
Around the state, bankruptcies rose in the four major counties last month. Honolulu County filings ticked up to 100 from 98, Hawaii County filings more than doubled to 10 from four, Maui County filings doubled to 20 from 10 and Kauai County filings tripled to six from two.
Bankruptcy filings in April rose from a year ago.
2021 2020 PCT. CHANGE
Chapter 7 94 77 22.1%
Chapter 11 0 0 —
Chapter 13 42 37 13.5%
Individuals with regular sources of income set up plans to pay creditors over time
Total 136 114 19.3%
Source: U.S. Bankruptcy Court, District of Hawaii