Bankruptcy filings in August soared to their highest increase this year as cash-strapped consumers reached a breaking point in Hawai'i's slowing economy.

Data from the U.S. Bankruptcy Court in Honolulu shows a 50 percent increase in filings compared with August 2007, as 187 bankruptcy petitions were filed. The total was the most filed in any month this year and the highest monthly rise on a percentage basis this year. Nearly all 187 were personal bankruptcy filings.

Bankruptcies in Hawai'i and the nation have been rising because of factors such as a sluggish economy, slumping housing prices and a change in U.S. bankruptcy law.

Locally, Hawai'i's economy has been hit hard by falling tourism, higher gasoline and electricity prices, costlier groceries and more than 5,300 layoffs since the beginning of the year.

Many bankruptcies are tied to people not being able to meet their mortgage payments, said Honolulu bankruptcy attorney Stuart Ing, adding that he is hiring more staff to keep up with the increase in filings.

Some consumers manage to get their monthly mortgage payments reduced but can't handle the credit card debt they ran up paying their old mortgage, Ing said.

"I don't see the light at the end of the tunnel yet," Ing added.

A review of Hawai'i bankruptcies shows they have steadily increased this year after starting the year with 114 filings in January. Nationally, bankruptcy experts say they believe more than 1 million individuals and businesses will seek protection from creditors through a bankruptcy this year, the first time that threshold has been reached since the new bankruptcy law went into effect in 2005.

"What's the saying? 'Once you're in a hole, stop digging,' " said Ed Magauran, a Honolulu attorney who specializes in bankruptcy filings. "I think that's what a lot of people are realizing. The only thing that there is to bail your Average Joe consumer out is the bankruptcy code."

Magauran said many of the people he sees have assessed their situation and Hawai'i's economic prospects and realized they weren't going to get out from under their debts in the near future.

Some of these people have adjustable-rate mortgages that have increased, while others have interest-only loans that are turning into interest plus principal payments.

Others have had limits placed on the amount of overtime they can take or have had their work hours cut, Magauran said. Some have lost their jobs, while others are suffering from overspending with credit cards or can't pay medical bills.

ISLE NUMBERS STILL LOW

Magauran also said that in some cases, people's budgets have snapped under the weight of higher costs. He said some of his clients are spending $500 a month on gasoline to commute from Leeward O'ahu to jobs in Waikiki.

To be sure, the bankruptcy filings only affected a very small percentage of Hawai'i residents, and, according to a federal court analysis, the state had the second lowest per-capita filing rate of any state in the nation during the year ended June 30. The analysis found there were 1.24 filings per 1,000 local residents during the period.

That compared with 3.15 filings per 1,000 nationally. Only Alaska had a lower rate.

The August increase also comes after low numbers over the past two years, after the bankruptcy law was changed to make it more difficult and expensive to seek financial protection through the courts.

The same federal study that found Hawai'i among the lowest per-capita numbers showed bankruptcy filings here were increasing slightly faster than the national rate. During the study period, the number of filings in Hawai'i grew by 33 percent compared with a year earlier.

That compared with the national rate of about 29 percent.

BUT MORE REPEAT FILERS

One thing bankruptcy lawyers agree on is that the number of filings probably won't decline any time soon.

"I don't see the numbers coming down," Magauran said. "Whether they level off or continue to rise, I don't know, but I do think it's a function of the economy."

Ing said one recent trend is filings by mortgage brokers and real estate agents whose business has slowed to the point where they aren't selling enough or handling enough transactions.

"There are sales, but it's not enough to support the number of mortgage brokers and Realtors out there," he said, adding that he's also noticed that people who filed for bankruptcy less than eight years ago are starting to trickle back into his office.

"Two or three years ago, I didn't see repeat customers. Now I'm starting to see a lot more of them."

Ing said there may be some relief for the mortgage market now that Fannie Mae and Freddie Mac have been taken over.

"But until the market finds the bottom, I don't see anything turning around."