Bankruptcies in Hawaii plunge 30.4% in October

Statewide bankruptcies continued their yearlong deep dive by tumbling 30.4% in October to their lowest total for that month in 15 years.

The 87 cases in October marked the ninth month out of 10 this year that filings were down from the year-­earlier period, and was the fourth month in a row when cases had fallen below 100, according to new data released by the U.S. Bankruptcy Court, District of Hawaii.

The last time there were fewer cases in October was in 2006 when 85 cases were filed.

There were 125 cases filed in October 2020.

Honolulu bankruptcy attorney Greg Dunn expects bankruptcies to continue their downward trend through the rest of the year.

“November and December months are normally slower for bankruptcy case filings because most people try to avoid filing for bankruptcy during the holidays,” Dunn said. “I foresee bankruptcy cases to start picking up in January because we are seeing an increase in debt inquiries in the last couple months. I believe that there are more consumers out there that need debt relief due to threats of being sued by their creditors and threats of garnishment than what the numbers reflect by the recent bankruptcy filings.”

There have been 1,014 filings through the first 10 months of the year, down 20.4% from 1,274 at the same time in 2020. At the current pace the state will finish the year with 1,217 filings to mark the lowest annual total since there were 955 in 2006, when there were fewer cases because people had rushed to file in 2005 ahead of an October change in the Bankruptcy Code that made it more difficult and costly to seek financial protection.

Even though the state’s eviction moratorium ended in August, tenants still have more time to respond to eviction notices and the right to a mediation session with landlords. The law also limits initial eviction filings to tenants who owe at least four months of back rent.

“There has been a lot of government assistance since the pandemic, but these benefits are running out,” Dunn said. “I’ve noticed that people are coming in to file and start bankruptcies because their unemployment compensation and their pandemic unemployment assistance has run out. There are a lot of people that want to file bankruptcy, but they don’t have the money to file.”

Dunn said his office is filing more cases because people’s checks are being garnished or they are being sued by their creditors.

“The consumer cannot afford to have their paychecks garnished up to 25% each time they get paid and continue paying rent, food and necessities with the high cost of living in Hawaii,” Dunn said. “This is what drives people into bankruptcy. With inflation continuing to rise and paychecks remaining the same, consumers will continue to use their credit cards and borrow money to make up the difference to pay their monthly expenses, driving more bankruptcies to be filed.”

In October, Chapter 7 liquidation filings — the most common type of bankruptcy — dropped 32.3% to 63 from 93 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, fell 25% to 24 from 32.

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 fell in three of the four major counties last month. Honolulu County filings dropped to 57 from 91, Hawaii County filings declined to nine from 11 and Maui County filings fell to 15 from 21. Kauai County filings tripled to six from two.

SEEKING RELIEF

Bankruptcy filings for October fell from a year ago.

2021 2020 PCT. CHANGE

Chapter 7 63 93 -32.3%

Liquidation

Chapter 11 0 0 —

Business reorganization

Chapter 13 24 32 25.0%

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

Total 87 125 -30.4%

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