Hawaii Bankruptcy Filings Surge

Hawaii’s surge in bankruptcy filings is picking up this year where it left off in 2018.

The number of cases in January jumped 43.3 percent to 149 to mark its highest level for the month in seven years. The last time it was higher was in 2013 when there were 159 cases filed, according to new data released by the U.S. Bankruptcy Court, District of Hawaii.

Hawaii’s economy, which has been showing signs of slowing growth, saw its streak of seven straight years of declining bankruptcies come to an end in 2018 when the number of filings jumped 10.2 percent to 1,490, the highest level in three years. The last time there were more filings was in 2015 when there were 1,569 cases.

Honolulu bankruptcy attorney Blake Goodman said he expects the number of cases to keep rising for the next several years based on the historical trend since 1990 that shows statewide bankruptcy filings following an eight-year cycle. He said the only exception was in 2005 when a flurry of cases were filed ahead of a change in the Bankruptcy Code, followed by a sharp drop for a couple years.

SEEKING RELIEF
Bankruptcy filings were up in January from a year ago.
Chapter 7: Liquidation

> 2019: 103
> 2018: 64
> Percent change: 60.9%

Chapter 11: Business reorganization

> 2019: 1
> 2018: 0
> Percent change: —

Chapter 13: Individuals with regular sources of income set up plans to pay creditors over time

> 2019: 45
> 2018: 40
> Percent change: 12.5%

Total

> 2019: 149
> 2018: 104
> Percent change: 43.3%

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

“If you digest the numbers correctly, you see an eight-year cycle for bankruptcy filings in Hawaii the last 28 years, and right now we’re right on the eight-year cycle, so there should be a significant increase in bankruptcy filings for the next handful of years, if not five or six,” Goodman said.

He said he expects Hawaii real estate prices to go down, state unemployment to increase and tourism to possibly follow that downward trend if the mainland economy begins to suffer.

“I think what happened to Hawaii in the late ’90s when the Japanese bubble burst, this time it’s going to be the Chinese bubble bursting,” Goodman said. “That’s seriously going to affect Chinese tourism spending in Hawaii and the Chinese investments in the 13 condo high-rises that were built here in the last few years.”

In January, the 103 Chapter 7 liquidation filings represented a 60.9 percent increase from 64 in the year-earlier period. Chapter 7 is the most common type of bankruptcy.

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 12.5 percent to 45 from 40.

There was one Chapter 11 case last month compared with none at the same time a year ago. That was from Dillingham Restaurant Corp., which operates Bob’s Big Bear Restaurant. Chapter 11 filings typically involve business reorganization.

Bankruptcy filings rose in three of the four major counties from the year- earlier period and were flat in one county. Honolulu filings jumped to 107 from 81, Hawaii County filings more than tripled to 16 from five and Kauai County filings nearly quadrupled to 11 from three. Maui County filings remained at 15 for both periods.

By Dave Segal

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