Hawaii bankruptcies ticked up in December but still finished 2022 at their lowest level in 17 years.
Local bankruptcy attorneys are cautioning, however, that the numbers don’t look as good as they seem.
The 89 cases filed in December pushed the full-year total to 951, down 19.7% from 1,184 in 2021 and the lowest amount since there were 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.
While pandemic relief helped stem the number of people last year seeking financial protection from the court, Honolulu bankruptcy attorney Greg Dunn said many consumers are teetering on the edge.
“I do believe the worst is yet to come,” Dunn said. “Hawaii residents are in worse shape than the bankruptcy numbers indicate. I am getting many calls from people that they’ve drained their savings and credit lines to take care of their debts and have no other solution but to consider bankruptcy as a solution to get rid of their debt and get a fresh start.”
There were fewer than 100 bankruptcies in all but one month last year, and only twice during the year did the number of monthly filings exceed the year-earlier period, according to recent data from U.S. Bankruptcy Court, District of Hawaii. The 89 filings were up 7.2% from 83 in December 2021.
“I continue to be surprised by the decline in bankruptcy declarations in Hawaii and across the country,” Honolulu bankruptcy attorney Blake Goodman said. “The national number is about 50% of pre-pandemic levels. Who would have guessed that bankruptcy volumes would have declined during the pandemic, and house and used-car values increase dramatically?
“Nonetheless, the large government assistance programs stymied collection prohibitions on foreclosures and evictions, and student loan payment moratoriums all helped many financially distraught families stay afloat during and after the pandemic.”
Goodman said the clock is ticking, though, for consumers in debt.
“I believe all that is running out though, and based on the tailwinds of activity at our office since last August, I predict the bankruptcy filings in Hawaii for 2023 will increase by 25% at least, or exceed 1,200 cases,” he said.
Honolulu bankruptcy attorney Ed Magauran said the stigma of filing for bankruptcy is holding some people back.
“I think Hawaii folks are in the same boat as everybody else,” he said. “Almost everyone you know is living paycheck to paycheck. That’s not unique to Hawaii. It takes a little courage to reach out and consider a bankruptcy for someone who has a lot of debt. There are issues of pride and potential stigma. Frankly, they are short-lived when people realize what they can accomplish and how they can get their restful sleep back.”
Chapter 7 liquidation cases — the most common type of bankruptcy — dipped 5.5% to 52 from 55 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, rose 22.2% to 33 from 27.
There were four Chapter 11 filings in December, compared with one in the year-earlier period. All the December filings involved four Big Island parcels member-managed by developer Brian Anderson. The limited liability corporations are Nani Wale O‘ Puako LLC, Nani Wale O‘ Laika LLC, Nani Wale O‘ Anaeho‘omalu LLC, and Nani Wale O‘ Anahulu LLC. Chapter 11 filings are primarily for business reorganization.
Across the state, bankruptcies were mixed in the four major counties in December. Honolulu County filings rose to 60 from 54 and Maui County filings increased to 13 from nine. Hawaii County filings fell to 13 from 15 and Kauai County filings declined to three from five.
SEEKING RELIEF
Bankruptcy filings in December rose from a year ago.
2022 2021 PCT. CHANGE
Chapter 7 52 55 -5.5%
Liquidation
Chapter 11 4 1 —
Business reorganization
Chapter 13 33 27 22.2%
Individuals with regular sources of income set up plans to pay creditors over time
Total 89 83 7.2%
Source: U.S. Bankruptcy Court, District of Hawaii
