Bankruptcies down 13 percent from last year

By John Duchemin
Advertiser Staff Writer

Bankruptcies for the first half of 2002 are down significantly from last year's levels, a sign that observers said could mean Hawai'i households are recovering from the post-Sept. 11 economic shock.

As of yesterday afternoon, 2,092 people and businesses had filed for bankruptcy protection in the first six months of the year, U.S. Bankruptcy Court clerk Mark Van Allsburg said. That's a 13-percent drop from the first six months of 2001, when the court received 2,398 bankruptcy filings.

The drop in bankruptcies coincides with other economic data that shows Hawai'i may be recovering from the economic downturn that followed the Sept. 11 attacks.

May visitor numbers were improved, unemployment has dropped, and the housing sector is healthy.

"Even though people lost jobs and income, there hasn't been a severe economic downturn and hardship for most families," said Byron Gangnes, economics professor at the University of Hawai'i and a member of the UH Economic Research Organization.

"This (bankruptcy data) is another confirmation that households are doing relatively well," he said. "That although some were affected severely, there hasn't been a spillover to the rest of the economy."

Bankruptcies are still far more frequent than they were in the early to mid-1990s, when a couple thousand Hawai'i residents filed for bankruptcies each year.

But by the late-1990s, after a decade of economic struggles, about 5,000 Hawai'i people — more than 400 every month — were filing for bankruptcy protection each year.

That number dropped in 2000 as the state's economy began to recover, but bankruptcy filings increased again last year.

More than 5,000 Hawai'i residents and businesses sought bankruptcy protection in 2001, pushing the number of filings to the third-highest year on record as financial troubles reached the crisis point for many after the Sept. 11 attacks.

The increase marked yet another year of spiraling bankruptcies in the state and coincided with a nationwide increase in bankruptcies, increases in consumer credit debt, slowing economic growth in Hawai'i and stagnating incomes.

That increase, coupled with the economic downturn in the wake of the terrorist attacks, moved several experts to fear a big wave of bankruptcies as thousands of tourism workers lost their jobs or took pay cuts.

The state estimated that since Sept. 11 through December, more than 39,000 new claims for unemployment were filed as workers, the majority of them in tourism-related industries, lost their jobs or had their hours cut. The state's jobless rate rose to 5.5 percent in November, the highest level in more than two years.

But the wave has so far never materialized, and court records show bankruptcy filings have actually dropped for four straight months.

Honolulu bankruptcy attorney Greg Dunn said a good borrowing market, with lower interest rates, may have made it easier for residents to stay afloat.

Dunn said he's seeing fewer bankruptcies, but the volume of people seeking debt counseling is about the same.

"The first three months of the year we were going like crazy (with new bankruptcy filings), but the last several months it's been down about 20 percent," Dunn said. "But it's still pretty busy here; we're working with a lot of people to solve their debt problems."

Reach John Duchemin at 525-8062 or by e-mail at jduchemin@honoluluadvertiser.com.