Chapter 13 bankruptcies increase

Hawaii bankruptcies edged up in November for the second month in a row, but local attorneys are hesitant to say the shift signals a change in the direction of the state economy.

The number of cases has slowly been rising following a streak of 54 straight months that bankruptcies had been flat or down from the year-earlier period.

Seeking Relief

Bankruptcy filings in November rose from a year ago.

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

In November, statewide filings rose 6.3 percent to 136 from 128 in the year-earlier period, according to data released Tuesday from U.S. Bankruptcy Court, District of Hawaii. That follows a 2.3 percent increase in October when there also were 136 cases filed, up from 133 during the same time frame a year ago.

“I did notice just a slight bump in my cases per month the last couple of months, but I don’t know if that’s going to be forming a new trend,” Honolulu bankruptcy attorney Greg Dunn said. “It’s really hard to say what that means yet. It’s not that much of a difference (between the year-over-year comparisons) to really make any conclusions.”

Honolulu bankruptcy attorney Blake Goodman suggested the small increases in the last two months could be tied to attorneys trying to get their cases filed before a new, more labor-intensive filing requirement went into effect Tuesday. The new requirement entails the disclosure of more financial information.

“The forms changed quite significantly today (Tuesday), and I think some of the attorneys were marshaling their clients to get their cases in before the forms changed,” Goodman said. “Attorneys were saying they wanted to file before they had to redo things, and that might have bumped the October and November numbers. But those are usually very slow months, and my volumes have been sluggish.”

Bankruptcy is considered by economists to be a lagging indicator because most people aren’t motivated to take that drastic step unless they’ve exhausted all other options.

Hawaii’s economy, though, shows no signs of slowing with the labor force and number of people employed at record highs and the seasonally adjusted unemployment rate having fallen for five straight months. The state’s 3.3 percent jobless rate in October was tied with New Hampshire for the fourth lowest in the U.S., behind only North Dakota (2.8 percent), Nebraska (2.9 percent) and South Dakota (3.2 percent), according to the U.S. Department of Labor.

Despite the increase in filings, Chapter 7 liquidation — the most common type of bankruptcy — slipped 2.2 percent in November to 89 from 91 in the year-earlier period.

However, Chapter 13 filings, which allow individuals with regular sources of income to set up plans to pay creditors over time, jumped 27.8 percent to 46 from 36. The double-digit increase followed a spike of 45.2 percent in October.

“It does seem like I’m filing more Chapter 13s than I have in the past percentagewise,” Dunn said. “I could make a reasonable conclusion that people are still doing better but still having problems with their debt. I think the economy is better, so maybe people can afford to pay a portion of their debts.”

There was one Chapter 11 bankruptcy last month. It was filed by Honey Bee USA Inc., the delinquent developer of the Waikiki Landing, a controversial public-private partnership at the Ala Wai Small Boat Harbor. The bankruptcy gives the developer additional time to meet its lease obligations after the state Department of Land and Natural Resource’s Division of Boating and Ocean Recreation announced it planned to cancel its lease agreement with Honey Bee effective Nov. 15 for nonpayment of more than $500,000 in back rent and a $1 million performance bond. There was one Chapter 11 in the year-earlier period.

The four major counties were mixed last month in the number of filings. Bankruptcies in the City and County of Honolulu rose to 85 from 70, and Maui filings rose to 36 from 28. Hawaii County bankruptcies fell by more than half to 11 from 23, while Kauai filings dropped to four from seven.

Despite last month’s overall increase in bankruptcies, the number of filings is on pace to represent the lowest annual total since 1,381 were filed in 2007. Through the first 11 months of this year, there were 1,463 filings statewide, an average of 133 a month. At that pace Hawaii is on track this year to see about 1,596 filings.