Isle bankruptcies
hit lowest level
since 1996
The decline comes despite
the rising costs of oil,
housing and lending rates
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Preliminary numbers released yesterday by U.S. Bankruptcy Court in Hawaii showed that Chapters 7, 11 and 13 filings declined for the 11th straight quarter from the same period a year earlier. There were 682 filings in the third quarter compared with 914 a year ago. It was the fewest filings since 593 were recorded in the first quarter of 1996.
Bank of Hawaii chief economist Paul Brewbaker said the bankruptcy declines eventually will level off, but for now the state's economy is strong enough to overcome the effects of rising interest rates, higher energy prices and increased housing costs.
The Fed raised its benchmark interest rate by a quarter-point, to 1.75 percent, earlier this month, making it more expensive for consumers to borrow money. In addition, the cost of oil is hovering around $50 a barrel, and the median price for Oahu single-family homes rose 14 percent in August to $450,000.
Despite the challenges of rising interest rates and higher home prices, Hawaii's economy continues to show strength across several areas.
In August, statewide unemployment fell to 2.9 percent, hotel occupancy reached a 14-year high of 83.6 percent and the number of domestic visitors arriving by air hit 459,561 to set a record for the seventh consecutive month.
"Hawaii can't go on logging better and better performance indicators forever," Brewbaker said. "It's just not because of changes in the external environment like interest rates and energy costs. It's that Hawaii is running up against the constraints that accompany full employment. Right now, Hawaii's upside is limited by capacity constraints, principally in the labor market. There's just not enough labor supply growth to keep things getting better and better."
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Brewbaker said the labor force is not growing fast enough in many occupations to keep up with demand.
"Hawaii has exhausted the labor supply here," Brewbaker said. "You hear this a lot in the building trade and in technical things. It's tough for the economy, but it's a good thing for the people who have those skills."
Chapter 7 filings, which involve liquidating the assets of a business or a consumer, dropped 22.5 percent last quarter to 611 from 788.
Chapter 13 filings, which allow a wage earner to pay creditors over three years, dropped 41.7 percent to 70 from 120.
There was only one Chapter 11 filing in the quarter compared with six in the year-ago period. Chapter 11 filings cover business reorganizations.
The one Chapter 11 case last quarter was by the Royal Hawaiian Shooting Club, which filed for reorganization in July after being unable to pay the $800,000 principal in unsecured promissory notes that nine local investors issued to a 23-member shareholders group in 1997.
Barbara Pascua, president and general manager of the club, said the bankruptcy was prompted by lower revenue when Japanese tourists stayed home after the Sept. 11, 2001, terrorist attacks.
But tourists from Japan are increasingly coming back to the state, and business is looking better, she said.
"We've always had bad months in June, July and the first two weeks of August," Pascua said. "But the last half of August, September and October are better months, and we seem to be doing a lot better now."
She said the summer months are slow because Japanese visitors come with younger children and are less likely to find time to go to the shooting range.
Pascua said the reorganization looks promising and negotiations are going well.
"My guess is in another month we'll drop the bankruptcy," she said.