While tourists are spending more and home prices have begun to climb, Hawaii’s economy still has a long way to go before erasing the negative effects of the recession.

The federal Bankruptcy Court reported yesterday that 3,954 Hawaii residents and businesses filed for bankruptcy last year, the highest level in five years and a 27.5 percent increase over 2009.

"We’re still feeling the effects of the tough job market. A lot of people who are filing either lost their job or can’t find a job that pays as well as their last job," said attorney Jean Christensen.

"At some point you would expect to see some saturation in bankruptcy filings in 2011 or 2012," Christensen said. "But there probably isn’t enough certainty in the economy for the job market to improve dramatically in the near future."

It was not uncommon for some of those who ended up filing for bankruptcy during the recent downturn to have carried $10,000 to $20,000 of credit card debt during good times, Christensen said. They suddenly found themselves in trouble when they lost their jobs or took big pay cuts.

Some with mortgages fell behind on their monthly payments and faced foreclosure.

"We’re seeing a problem of loans being underwater that we never saw a few years ago," Christensen said. "There was a lot of confusion about loan modification programs, and people waiting for modifications to come through kept falling farther and farther behind on their payments."

One solution for people in that situation is to file for Chapter 13 bankruptcy reorganization, which allows them to pay what is past due over a three- to five-year period. As a result, Christensen said she saw a "big spike" in the number of Chapter 13 filings this year.

The bankruptcy data released yesterday did offer some hope, however. The rate of increase in filings in 2010 — 27.5 percent — was lower than the 49.3 percent in 2009 and 50.4 percent in 2008. And the number of cases in December declined by 5 percent from December 2009, the first month-over-month decrease in more than four years.

Still, bankruptcy attorneys said business remained brisk.

"My phones were ringing in December," Christensen said.

The growth in bankruptcies will most likely come to an end when jobs are more plentiful and salaries are rising.

The state’s 6.4 percent unemployment rate is lower than the national average, but it has improved only marginally since hitting 7 percent at the depths of the recession in 2009.

The University of Hawaii Economic Research Organization is forecasting the statewide unemployment rate to fall from an average of 6.5 percent in 2010 to 5.9 percent in 2011, still well above the range of 2 percent to 3 percent in the years preceding the recession.

Also, the unemployment numbers can mask the severity of the problem in Hawaii, where there is a higher number of workers with two or three jobs. A worker can lose one job and suffer a drop in income but not be counted as unemployed because she or he is still working at the other jobs.

According to Bankruptcy Court data, there were 853 Chapter 13 filings statewide this year, up 42.4 percent from 2009. Chapter 7 liquidation cases, meanwhile, rose 24.1 percent to 3,078 cases. Another 23 cases were Chapter 11 reorganization or Chapter 15 bankruptcies.