No pain, no bankruptcy.
With Hawaii residents apparently feeling financially healthy, the number of bankruptcy cases declined in January for the ninth straight month as the state’s economy continued to improve.
Filings dropped 23.1% to 70 from 91 in the year-earlier period, according to new data released by the U.S. Bankruptcy Court, District of Hawaii. That is the lowest number since there were 57 in February 2006. It also represented the seventh consecutive month that the number of cases was fewer than 100.
“Many residents of Hawaii have not yet felt excessive financial pain to precipitate a bankruptcy,” Honolulu bankruptcy attorney Greg Dunn said. “The pandemic took away some temptations that may have led to overspending. They weren’t spending money on expensive extras like vacations or eating out as often. Also, they were not paying their rent, mortgage or student loans and were not being evicted, foreclosed or sued.”
Dunn said unless consumers are facing an immediate threat such as garnishment of wages or losing their home in a foreclosure, they will avoid bankruptcy and consider other alternatives to manage their debts such as negotiating with their creditors, enrolling in debt management programs and debt consolidation loans.
“If these other alternatives fail, they will turn to bankruptcy as a last resort,” he said. “So, I do expect bankruptcies to rise in the latter part of 2022.”
Chapter 7 liquidation filings — the most common type of bankruptcy — dropped 41.9% to 43 last month from 74 in January 2021.
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 58.8% to 27 from 17.
There were no Chapter 11 filings on January or in the year-earlier period. Chapter 11 filings are primarily for business reorganization.
Dunn said even though bankruptcies have been on a downward trend, he expects that direction will reverse later this year.
“January bankruptcies continue to fall because the government continues to pump more money into the economy to help keep businesses afloat so that the consumer will return to their old borrowing and spending habits,” Dunn said. “For consumers who are struggling to pay their debts, bankruptcy will be a much-needed financial relief as Hawaii is notorious for its high taxes and high cost of living. With so many federal assistance programs, moratoriums and freezes ending, I expect bankruptcies to rise in the latter part of 2022.”
Across the state, bankruptcies were mixed in the four major counties in January. Honolulu County filings dropped to 49 from 71, and Maui County filings dipped to nine from 11. Hawaii County filings rose to 11 from eight. Kauai County filings remained at one.
SEEKING RELIEF
Bankruptcy filings in January fell from a year ago.
2022 2021 PCT. change
Chapter 7 43 74 -41.9%
Liquidation
Chapter 11 0 0 —
Business reorganization
Chapter 13 27 17 58.8%
Individuals with regular sources of income set up plans to pay creditors over time
Total 70 91 -23.1%
Source: U.S. Bankruptcy Court, District of Hawaii
