A total of 2,054 local individuals and businesses have filed for bankruptcy protection for the year as of yesterday, surpassing the previous record of 2,022 for all of 1995. Last year's record was more than 27 percent higher than 1994's bankruptcy tally of 1,587.
"We've been losing jobs for four years straight so you would expect bankruptcies to rise," said Leroy Laney, chief economist at First Hawaiian Bank.
Most of this year's filings were personal bankruptcies in the form of Chapter 7 liquidations.
The number of Chapter 7 filings this year hit 1,838 yesterday, compared with 1,842 for all of last year, according to the Office of the U.S. Trustee, which oversees the administration of bankruptcy cases in Hawaii.
Business bankruptcies in the form of Chapter 11 reorganizations have increased 16.6 percent to 42 this year from 36 in all of 1995, the federal agency said. The number of Chapter 13 filings - a form of personal bankruptcy that allows debtors to work out their debts over a three to five year period - have risen to 174 this year from 141 for all of 1995.
Laney sees a direct correlation between the increased bankruptcies and Hawaii's declining labor force.
He said that the overall job count statewide is down by about 1 percent for the first seven months this year.
That comes after the statewide job count declined by 0.5 percent in 1995 and 0.7 percent in 1994, Laney said.
And while some sectors of Hawaii's economy such as tourism have improved, others areas such as construction continue to lag, weakening the overall economy and increasing the likelihood of increased the bankruptcy filings over the near term, Laney said.
"We haven't had a prolonged period of job losses like this in four decades," Laney said.
Paul Brewbaker, chief economist at the Bank of Hawaii, sees another reason for the increased bankruptcies.
During the past decade, credit card issuers have become more aggressive in marketing their cards to consumers, often times offering them more individuals who could be considered a credit risk, he said.
Combined with a weak economy, it's no surprise that the easy credit policies have resulted in increased delinquencies and bankruptcies, Brewbaker said.
"There's been more credit pushed out during the 1990s and credit card delinquencies (and bankruptcies) have really soared," Brewbaker said.