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No pain, no bankruptcy.
With Hawaii residents apparently feeling financially healthy, the number of bankruptcy cases fell in January for the ninth consecutive month as the state’s economy continued to improve.
Deposits fell 23.1% to 70 from 91 a year earlier, according to new data released by the US Bankruptcy Court, District of Hawaii. It is the lowest number since there were 57 in February 2006. It was also the seventh month in a row that the number of cases was below 100.
“Many Hawaiians have yet to experience excessive financial hardship to precipitate bankruptcy,” said Honolulu bankruptcy attorney Greg Dunn. “The pandemic took away some temptations that could have led to overspending. They didn’t spend money on expensive extras like vacations or dining out as often. They also didn’t pay their rent, mortgage, or student loans, and weren’t evicted, seized, or sued.
Dunn said that unless consumers face an immediate threat such as wage garnishment or losing their home in foreclosure, they will avoid bankruptcy and consider other alternatives to manage their debts, such as negotiating with their creditors, enrolling in debt management programs and debt consolidation loans. .
“If these other alternatives fail, they will look to bankruptcy as a last resort,” he said. “So I expect bankruptcies to increase in the latter part of 2022.”
Chapter 7 liquidation filings – the most common type of bankruptcy – fell 41.9% to 43 last month from 74 in January 2021.
Chapter 13 filings, which allow people with regular sources of income to set up plans to make installment payments to creditors over three to five years, rose 58.8% to 27 from 17.
There were no Chapter 11 filings in January or the prior year period. Chapter 11 filings primarily relate to corporate reorganizations.
Dunn said that while bankruptcies were on a downward trend, he expects that direction to reverse later this year.
“January bankruptcies continue to decline because the government continues to pump more money into the economy to help keep businesses afloat so the consumer can return to their old borrowing and spending habits,” he said. Dunn said. “For consumers struggling to pay their debts, bankruptcy will be much-needed financial relief, as Hawaii is known for its high taxes and high cost of living. With the end of so many federal aid programs, moratoriums and freezes, I expect bankruptcies to increase in the latter part of 2022.”
Statewide, bankruptcies were mixed in the four major counties in January. Honolulu County filings fell to 49 from 71, and Maui County filings fell to nine from 11. Hawaii County filings fell to 11 from eight. Kauai County filings remained at one.
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Bankruptcy filings in January fell from a year ago.
2022 2021 pct. cash
Chapter 7 43 74 -41.9%
Liquidation
Chapter 11 0 0 —
Business reorganization
Chapter 13 27 17 58.8%
People with regular sources of income make plans to pay creditors over time
Total 70 91 -23.1%
Source: United States Bankruptcy Court, District of Hawaii
