Bankruptcy filings in Hawai'i down 10 percent
By Sean Hao
Advertiser Staff Writer
Hawai'i's bankruptcy rate, which spiked after the Sept. 11 attacks tripped up the tourism industry, is expected to end the year down more than 10 percent.
Through Nov. 30, the number of bankruptcy filings by Hawai'i residents and businesses was 10.5 percent below the same period a year ago, at 4,205 cases, according to the U.S. Bankruptcy Court in Honolulu.
The trend is expected to continue for December, typically a slow month for filings. At November's pace of 364 cases, the state would end the year with 4,569 bankruptcy filings, the same level as in 1997 and 2000.
Experts saw the dip as a sign of continued slow economic recovery, but surprising given the continued job losses in tourism.
Leroy Laney, a Hawai'i Pacific University economics professor, said reasons for the decline are difficult to pinpoint, but rising personal income and home values, coupled with low interest rates, might be helping some people stave off bankruptcy.
"We have come back," Laney said. "The recession wasn't as deep, long or as wide as initially anticipated."
Hawai'i's decline bucks a national trend of rising bankruptcy rates, which at the end of September hit a historic high of 1.55 million cases, according to the administrative office of the U.S. bankruptcy courts.
The state's jobless rate fell slightly in October, to 4 percent, according to the state Department of
Labor and Industrial Relations. That's significantly lower than the national rate of 5.3 percent in October, and could help explain the disparity with Mainland bankruptcy rates. Experts say higher unemployment typically correlates with increased bankruptcies.
Honolulu bankruptcy attorney Greg Dunn, who handles 700 to 1,000 personal bankruptcy cases a year, said the pace of filings usually picks up at the beginning of the year, in January to March, when Christmas-shopping bills come due.
December bankruptcies are slow so far, Dunn said, in sharp contrast to the months after Sept. 11, 2001, when "a lot of people got laid off, or their jobs were affected."
For September, October and November 2002, bankruptcy filings were down nearly 15 percent from the same period last year.
"There was a real knee-jerk reaction" to the economic crisis that followed Sept. 11, said Wendy Burkholder, interim managing director of Consumer Credit Counseling Service of Hawai'i. "I think (people) reacted swiftly, then it didn't have as deep an impact as they thought it would have."
At the time, Congress appeared poised to pass bankruptcy reforms aimed at making it more difficult for people to have their debt forgiven. That spurred many to seek protection from creditors while they could, said bankruptcy attorney Dawn Smith.
"Last year, I had calls about that all the time," she said. "That was a big thing last year.
"... We're still busy," Smith noted, "just not as busy as we had been. It's almost as though everybody has already filed."
Smith attributed some of the slowdown to the growing availability and marketing of credit counseling services. "I think a lot more people are trying to stick it out," she said.
That doesn't mean Americans are getting any better at managing their money. Burkholder said consumer debt remains a concern nationally as many people continue to spend beyond their means.
"That's the American way — have it all today," she said.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
• • •
