New law pushes bankruptcies down to a 16-year low
Statewide bankruptcies plunged in 2006 to a 16-year low, following a surge in 2005 when Hawaii residents rushed to file ahead of a more restrictive federal law.
Despite a slowdown in the residential real estate market, a leveling off in tourism and high fuel prices, Hawaii residents filed only 953 overall bankruptcy cases this year. That was down 78.7 percent from 4,481 in 2005 and was the lowest number of filings since 1990, when 754 Chapter 7 and 13 cases were filed, according to state and federal records.
The bankruptcy law that went into effect on Oct. 17, 2005, made it more expensive and difficult to file for bankruptcy.
"It's probably not useful to try to make comparisons because of the far-reaching scope in change in the bankruptcy law," Bank of Hawaii Chief Economist Paul Brewbaker said. "2006 seems to have been the year where this roughly decadelong expansion in Hawaii's economy really began to grind to a halt."
Some 793 people filed for Chapter 7 liquidation during 2006, down 80.8 percent from 4,125 in 2005. Chapter 13 filings, in which individuals set up plans to pay creditors over time, dropped 56.1 percent to 150 from 342. Chapter 11 filings, used for reorganizations, decreased 38.5 percent to 8 from 13. In addition, there were a handful of other types of filings this year and in 2005.
Brewbaker said the reduced number of bankruptcy filings belie other changes taking place in the economy, notably inflation, which grew to 5.8 percent in the first half of 2006.
"Most people aren't thinking of 2006 as the year they didn't get ahead, but in various areas of the economy, that's in fact the case," he said. "The good news is that the economy isn't going to go backward from this point. But it slowed dramatically from 2004, which had the highest growth rate in the last decade."