Bankruptcies fall Statewide bankruptcies declined 11.4 percent in the first six months of 2002 over year-ago levels, but Hawaii economist Leroy Laney cautioned against reading too much into what appears to be a sharp rebound from the Sept. 11 fallout.
11% in first half
Experts warn against drawing
conclusions from the numbersBy Dave Segal
dsegal@starbulletin.com
"I wouldn't draw the inference that it's a sign of a strong recovery in Hawaii's economy," said Laney, a professor of economics and finance at Hawaii Pacific University. "You're dealing with relatively small numbers because the size of the economy is small. Therefore, you can get aberrations. It may turn out to be a big percent but it's a relatively small sample. So we need to be careful in making interpretations on that."
In the first half of the year, personal and business Hawaii bankruptcies totaled 2,350 compared with 2,651 in the comparable period a year ago. At that rate, the state would end up with 4,700 filings for the year, which would represent a 6.7 percent drop from the 5,033 filed last year but a rise of 3.8 percent over the 4,527 bankruptcies filed in 2000.
As usual, the bulk of this year's filings were for Chapter 7, which involves the liquidation of a business' or consumer's nonexempt holdings. There were 2,092 such filings, 12.8 percent fewer than the 2,398 filed during the same period a year ago.
Meanwhile, filings for Chapter 11, which involves business reorganization, and Chapter 13, which is for "wage earner" or personal reorganization, were relatively flat year over year. There were 12 Chapter 11 filings during the first six months, two more than the year-ago period, while the 246 Chapter 13 filings were three greater than those in 2001. In chapters 11 and 13, the business or individual works out a repayment plan to its creditors and generally pays a certain percentage on the dollar.
"It's puzzling that you would find fewer (total bankruptcies) in the first six months of this year because after Sept. 11 we went somewhat into a recession," Laney said. "2000 was our peak year in a lot of respects -- things like visitor arrivals and personal income. So you might not see bankruptcies down in the first half of 2001, but you don't expect to see a significant decline in the first six months of 2002."
Laney suggested one reason for the decline in filings might be that interest rates are at a 40-year low, allowing individuals to refinance their mortgages and businesses to borrow money at lower costs.
U.S. Bankruptcy Court clerk Mark Van Allsburg said it's difficult to find a trend in bankruptcy filings.
"People think that bankruptcies are up when there's a bad economy and go down when there's a good economy," Van Allsburg said. "But it doesn't necessarily work that way. There's no correlation I know. Right now, bankruptcies are down on the West Coast and they're up on the East Coast. I can't explain it."
