Hawaii bankruptcies are on pace to finish at their lowest level in 17 years.
Despite a possible recession looming in 2023, state residents have been able to dodge filing for financial relief, with the 78 cases in November marking the 10th time this year there have been fewer than 100 filings in a month.
The 862 filed year to date represent an average of about 78 a month. If that number holds true in December, Hawaii will finish the year with 940, just below the 955 in 2006. There were fewer filings that year because people rushed to file before October 2005 when changes to federal law made it more difficult to seek bankruptcy protection.
Hawaii bankruptcy attorneys generally believe the number of cases will begin moving higher, but pinpointing when that will happen has been difficult.
“Nothing surprises me anymore in this economy,” Honolulu bankruptcy attorney Ed Magauran said. “What with the pandemic and the creditors’ reactions to the pandemic, I would not be surprised if the case filings remained low or if they started going higher. The bankruptcy ball is mostly in the creditors’ court and is a function of how aggressive they become.”
Magauran said Hawaii consumers are not in as good a shape as the low bankruptcy numbers would indicate.
”I do talk to people every day who are just treading water,” Magauran said. “They would love to be debt-free, but they have fears about what filing a bankruptcy means to their future credit. It helps to remind them that they do not have a credit problem, but a debt problem.”
Honolulu bankruptcy attorney Blake Goodman said his office has experienced a big upswell of new client calls, appointments and newly retained cases that started around August.
“It takes a while, usually months, for those cases to be entered in the bankruptcy court in order to reflect an increase in the number of filings, but with us a backlog of pent-up demand is taking place,” he said. “I expect the filing numbers for 2023 to increase statewide by 20% to 30%. This adjustment toward an equilibrium for Hawaii debtors seeking a resolution of painful financial problems is long overdue in Hawaii.”
Greg Dunn, another Honolulu bankruptcy attorney, expects an upswing after the holidays.
“Now that the pandemic and the government support programs are winding down, bankruptcy filings will increase in 2023 because debt collectors are becoming more aggressive in pursuing debtors threatening lawsuits and garnishing up to 25% of their paychecks,” Dunn said. “In the last few months, I have had inquiries regarding the state of Hawaii, Department of Taxation, seizing a percentage of their pay for back taxes. I also have been receiving more inquiries from people unable to pay their credit card and personal loan debts while their checks are being garnished.”
In November the 78 filings for the month were down 10.3% from 87 in the year-earlier period.
Chapter 7 liquidation cases — the most common type of bankruptcy — fell 22% to 46 from 59 in the year-earlier period.
Chapter 13 filings, which allow people with regular sources of income to set up plans to make installment payments to creditors over three to five years, inched up 3.6% to 29 from 28.
There were three Chapter 11 filings in November, compared with none in the year-earlier period. One of them was by Boteilho Hawaii Enterprises Inc., which does business as Cloverleaf Dairy in North Kohala, near Hawi. Cloverleaf Dairy is the last remaining commercial dairy farm in the state.
Another was from Honolulu-based Mulvadi Corp., which does business as Aloha Granola, Coffee Boulevard, Kona Supremo and Mulvadi Premium Outlet. The company packages and distributes Kona coffee, primarily 100% Kona coffee.
The third filing, which was from Hugh John Coflin of Makawao on Maui, involved rental property in Kihei.
Chapter 11 filings are primarily for business reorganization.
Across the state, bankruptcies fell in three of the four major counties in November. Honolulu County filings rose to 61 from 58, but Hawaii County filings fell to three from 10, Maui County filings declined to 11 from 14 and Kauai County fell to three from five.
