Bankruptcies
soar in isles

Figures are up 54% over
last year's record

By Peter Wagner
Star-Bulletin

More than 2,000 Hawaii residents and businesses have filed for bankruptcy so far this year, a staggering 54 percent increase from last year's record-shattering pace.

"The troubling thing is the numbers have gone up each quarter for the last 10 quarters," said Gayle Lau, assistant trustee of the U.S. Bankruptcy Court in Honolulu.

As of yesterday, 2,023 local residents and businesses had gone bankrupt in 1997 -- already exceeding the total filings for all of 1995, according to the court.

It's a continuation of a record-breaking climb that has gone from 873 bankruptcies in 1990 to 3,083 last year -- a 253 percent leap.

Lau noted that Hawaii's rate of increase is highest in the nation. He said bankruptcies topped 2,000 for the first time in 1995, went over 3,000 last year, and will likely eclipse 4,000 this year.

The vast majority of bankruptcy cases are personal filings under Chapter 7 of the federal bankruptcy code. The procedure liquidates valuables, divides the proceeds among creditors, and gives the debtor a fresh start, free of debt.

Less common are Chapter 13 filings, which allow the debtor to keep their belongings under a closely supervised plan to repay creditors over a period of years. Businesses often seek protection under Chapter 11 reorganization bankruptcies.

Carl Bonham, a University of Hawaii economist and member of the state Council on Revenues, sees bankruptcies as part of Hawaii's economic slump. "It's not surprising when you're losing jobs at the rate we've been shedding them," said Bonham. "It's just a reflection of the overall economy."

He notes that home foreclosures, a rarity before real estate values began to decline about six years ago, add to bankruptcy woes.

"You didn't have foreclosures in the 1980s because if people ran into financial problems, they could sell their house," he said.

"Now they're running into situations where the house is worth less than the loan."

A record 2,753 foreclosures were filed last year, a 40 percent increase over 1,587 the year before. Through the first five months of 1997, statewide foreclosures were already 16.5 percent ahead of the tally for the first six months of 1996, according to the state.

Hawaii is not alone with its rising bankruptcies.

Nationwide filings last year topped 1 million for the first time.

According to the American Bankruptcy Institute total filings nationwide more than doubled in the past decade. The trend continued in the first quarter of this year with a 27 percent rise.