Bankruptcy filings on rise; petitions outpacing 2000
By Glenn Scott
Advertiser Staff Writer
After declining last year, the number of bankruptcies in Hawai'i has risen 10 percent during the first half of 2001 as growing credit-card debt and potentially tighter laws have pushed up filings.
Through yesterday, the halfway point in the year, applicants had filed 2,645 petitions in U.S. Bankruptcy Court, according to statistics supplied by the Office of the U.S. Trustee. The amount is 241 more than the amount submitted during the same period last year.
This year's total, however, remains down from the 2,833 petitions filed during the first half of 1999, the year bankruptcies peaked in the Islands.
Still, the figures are a reminder that economic trends in Hawai'i aren't affecting everyone evenly: Bankruptcies are rising this year despite moderately encouraging statewide increases in job growth and personal income.
"In Hawai'i, it's easy for a family to make $50,000 a year and still go broke," says Joyce Uehara, bankruptcy and divorce lawyer.
One of Uehara's chief concerns is a popular legislation in Congress that would impose new restrictions on bankruptcy filings, including mandates for petitioners with certain levels of incomes to pay creditors a percentage of unsecured claims.
It's not clear what specifics such a bill might carry as it emerges from conference committees, or when it might go into effect. But the threat seems to have prompted more filings.
"Presumably, a lot of this increase is triggered by people who want to get in before the law changes," said attorney Randolph Slaton.
Uehara says the tighter conditions could be especially tough on Hawai'i residents, because the high cost of living skews income levels and removes financial cushions.
Uehara believes the rise in filings, though, involves more than the urgency over a likely law change. She said her cases commonly involve families locked into high mortgage payments who resort to credit cards to cover other expenses.
They jump from card to card seeking low interest rates until "you just hit the wall. You just can't keep borrowing," she said.
Chuck Crawford, managing director of Consumer Credit Counseling Service of Hawai'i, sees the increase in bankruptcy filings as also related to rising credit card debt. This year, the average balance owed on credit cards has risen 11 percent to $13,000 for clients coming in for counseling, he said.
"If that's the case, there is less money to pay on the other necessities, including the home mortgage," he said.
While bankruptcy filings are increasing, however, preliminary figures for foreclosure filings with the state courts show a 9 percent decline so far this year. Figures supplied by the state judiciary showed 1,096 filings through Thursday compared with 1,207 in the similar period last year.
Those totals pale compared to the 1,637 foreclosures through June 1999, and 2,013 through June 1998.
Though foreclosures conducted outside of the courts are harder to measure, professionals involved with the transactions said such non-judicial foreclosures are generally following trends similar to bankruptcies.
Attorney Marvin Dang, who heads the Hawai'i State Bar Association's collection law section, said yesterday that nonjudicial foreclosures are up slightly this year.
But Mike Pietsch, president of Title Guaranty Escrow Services, the state's largest title company, said foreclosures as a whole have declined. "There are fewer foreclosures now than two years ago," he said.
Attorney Jane Sugimura said many people and businesses struggling to avoid evictions, bankruptcies and foreclosures can trace their problems to rougher times in the state as long as a decade ago.
"In many cases, they went into hock over the last 10 years and they're just trying to dig their way out," she said. "It's nice if people are saying the economy is getting better, but for some it can be hard to see that."
