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Isle bankruptcies increase at breakneck pace


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POSTED: Wednesday, July 01, 2009

Hawaii residents filed 64.4 percent more bankruptcy cases last month than in June of last year, according to preliminary figures from U.S. Bankruptcy Court.

               

     

 

NO RELIEF IN SIGHT

        Statewide filings over the past 12 months:
       

268: June 2009
        250: May 2009
        251: April 2009
        270: March 2009
        226: Feb. 2009
        208: Jan. 2009
        223: Dec. 2008
        215: Nov. 2008
        197: Oct. 2008
        209: Sept. 2008
        187: Aug. 2008
        157: July 2008
        163: June 2008
        154: May 2008

       

As of yesterday afternoon, 268 bankruptcies had been filed, versus the 163 filed last June.

The 1,473 filings for the first half of this year dwarf the 889 cases filed in the first six months of last year, a rise of 65.77 percent.

Filings generally increase each year, with the exception of the year following October 2005, when a law change made bankruptcy filing more difficult, said Blake Goodman, a Honolulu bankruptcy attorney.

“;When the economy's really bad, (filings are) up 10 to 15 percent more than they would be in a prosperous period.”;

Part of the problem is that lenders have been too aggressive, not just with mortgage loans and vehicle loans, but in issuing credit cards, “;and their lending (practices) come back to hurt them at a time like this,”; Goodman said.

He commonly sees six-figure credit card debt among his clients, some of them with “;shockingly small”; incomes.

Increased unemployment and foreclosures have contributed to the bankruptcy boom because “;people have no equity and they can't borrow against their equity. That route is no longer available.”;

Mortgage modification attempts are another increasing problem, Goodman said.

“;They dangle this as an option, and it's very few people who will qualify for it. A lot of people are putting their hopes in a place that isn't going to turn into reality,”; he said.

Mortgage-modification intermediaries are marketing themselves to homeowners in distress “;and many, many of those are shams,”; he said. “;They are online businesses which are taking huge fees and doing very little other than taking the borrowers' money and making the situation worse, forcing them into bankruptcy, ultimately,”; he said.

His advice is, “;Do it yourself or don't do it at all.”;

Chapter 7 liquidation cases, the most common type of bankruptcy, jumped 64.5 percent to 204 cases from the 124 a year ago. Chapter 13 filings, sometimes called wage-earner bankruptcies, as they enable people with regular income to pay creditors over time, were up 67.6 percent to 62 cases from the 37 of last June.

The only dip in the numbers came in the single Chapter 11 filing for business reorganization. There was one case in June, a filing by Anekona LLC, led by real estate developer Brian Anderson. There were two filings in June 2008.

Anderson also filed a Chapter 11 case in May for another of his companies.

               

     

 

On the rise

        Bankruptcy filings in June increased from a year ago:
       

       

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 20092008PCT. CHANGE
Chapter 7204124+64.5%
Chapter 1112-50.0%
Chapter 136237+67.6%
Chapter 1510
Total268163+64.4%
               

       

        » Chapter 7: Liquidation
       

» Chapter 11: Business reorganization

       

» Chapter 13: Individuals with regular source of income set up plans to pay creditors over time

       

» Chapter 15: U.S. adoption of case brought in another country

       

Source: Office of the U.S. Trustee