Bankruptcy filings down, bucking national trend

By Sean Hao
Advertiser Staff Writer

Hawai'i's economy is holding up better than the country, judging by the pace of bankruptcies locally and nationally.

Personal bankruptcies statewide dropped to 3,908 versus 4,684 during the same period a year earlier. In comparison, personal bankruptcy filings nationwide jumped to 1,625,813 from 1,508,578 during the year-ago period, data from the Administrative Office of the U.S. Courts showed.

The upward trend in bankruptcies on the national level was expected despite signs of recovery in the economy. The rate of bankruptcies generally lags other economic indicators.

The drop in filings for Hawai'i reflects the state's better job and earnings growth compared with the Mainland, said Byron Gangnes, associate professor of economics with the University of Hawai'i Economic Research Organization.

Through the first six months of this year, for example, real personal income adjusted for inflation grew an estimated 3.5 percent and the number of payroll jobs increased 2.4 statewide through September.

"I think it's a confirmation of the general economic health here," he said. "In general, the economic health in Hawai'i is better than it is on the Mainland."

Hawai'i's economy is being boosted in part by a strong construction sector, a turnaround from the late 1990s when the state lagged while the Mainland economy boomed.

And unlike states such as California, Oregon and Washington, Hawai'i didn't experience heavy job gains and losses during the technology industry's recent boom-bust cycle.

Bankruptcy filings "are being overwhelmingly driven by individuals with household debt," said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of bankruptcy judges, lawyers and experts. "They do reflect the buildup of heavy consumer debt."

Just because Hawai'i consumers are filing for bankruptcy at lower rates than their Mainland counterparts doesn't mean they are any more financially disciplined, said Wendy Burkholder, executive director for Consumer Credit Counseling Service of Hawai'i.

She said debt levels for those seeking the agency's services also are rising — from an average of $11,000 in unsecured debt five years ago to $18,000 today.

"I think there may be a lot of people just band-aiding the problem by refinancing or getting linked up with less legitimate debt consolidation services," Burkholder said. "By and large, most of the people we see, they're in trouble because of a lack of education — really not understanding what they were getting into.

"The rest of it is kind of misfortune," she said, such as unanticipated medical bills, job losses or a death in the family.

The Associated Press contributed to this report. Reach Sean Hao at 525-8093 or shao@honoluluadvertiser.com.