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Isle bankruptcies soar


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POSTED: Saturday, May 30, 2009

Statewide bankruptcy filings continued to mount in May as the highest unemployment rate in three decades and triple-digit foreclosure increases kept Hawaii residents scrambling for financial relief.

;  The number of filings this month increased 60.4 percent from the year-earlier period, according to preliminary data from the Office of the U.S. Trustee. That percentage could rise slightly this weekend if any filings are submitted electronically.

As of yesterday there were 247 filings in May, slightly down from 251 in April and the seventh straight month that there have been at least 200 filings. There were 154 filings in May 2008.

Retired bankruptcy attorney Dawn Smith, who continues to work on loan modifications and reverse mortgages for the Law Office of Stuart Ing, said she's been overwhelmed.

“;It's out of control how many are people coming in, and over half of them seem to have houses,”; she said.

Even though Hawaii's unemployment rate slipped in April, the 6.9 percent level was just barely down from the 31-year high of 7.1 percent recorded in the previous month. Foreclosure filings in April soared nearly 217 percent from the year-earlier period.

“;The government, in my opinion, is trying to keep people's spirits up,”; Smith said. “;Consumer confidence has to keep up, or we're going to get in a faster downward spiral. The fact remains there's this huge unemployment rate, and incomes are going down.

“;Something has to happen, and for the most part, a lot of people are losing their homes. A lot of people kept refinancing and refinancing because it was an easy way to make money. They kept borrowing against the house, but people forget that the value can go back down again.”;

Chapter 7 filings, which involve liquidation and are the most common type of bankruptcy, jumped 59 percent in Hawaii this month to 194, from 122 a year ago. Chapter 13 filings, which enable an individual with a regular source of income to set up plans to pay creditors over time, rose 62.5 percent to 52 from 32.

There was one Chapter 11 reorganization filing—versus none in the year-earlier month—by Big Island developer Brian Anderson, owner of the Lotus at Diamond Head, formerly known as the W Hotel.

Smith, who has been retired for a year and a half, said divorce, job loss and illness are the most common reasons that people file for bankruptcy.

“;For a few years, when we were in boom times, you can have all these things happen, but you can still refinance your house to put you back above water for a while and things get better,”; she said. “;But in bad times where there's nowhere to borrow from and you've used up all your credit card limits, you lose your house or starting cashing in your retirement. People are finally tapped out.”;