The rate of increase is slowing
and, coupled with a real-estate surge,
could signal an eventual
turnaround

By Russ Lynch
Star-Bulletin

Bankruptcy filings in Hawaii continued to climb in the first six months of 1998, rising 30.9 percent compared with the record pace set in the first half of 1997.

Filing to escape from creditors has been so popular this year, in fact, that the number of filings in the first half-year -- 2,754 -- was substantially higher than the total of 2,022 for all of 1995.

Still, the total picture may not be as gloomy as the statistics appear to indicate, said one local economist.

Paul Brewbaker, chief economist at Bank of Hawaii, said the rate of increase this year is an improvement from the 1997 full-year increase of 44 percent over 1996.

Unless there is some seasonal factor at work that he doesn't know about, Brewbaker said, this year's filing rate could mean a 20-to-25 percent increase for the whole year.

"This could be another one of those beginning of the end signs," Brewbaker said. Another such sign is the current surge in real estate activity, he said.

These are early signs, however, and if they do add up to a real trend Hawaii still probably has another half-year or more to go before there is the real beginning of a turnaround, Brewbaker said.

Meanwhile, there are a lot of desperate people out there who have reached the end of their resources and faced no way out but bankruptcy.

As has been the case for the past several years, personal individual bankruptcies this year far outweigh business filings and the vast majority of filings have been for total liquidation rather than trying to work out payment plans.

Chapter 7 filings, for eradication of debts and disposal of whatever assets remain, totaled 2,465 through the first half of 1998, up 32.5 percent from 1,860 in the first half of 1997.

There were only 274 filings this year under Chapter 13, which gives debtors time to figure out a plan and make deals with creditors to avoid total liquidation. The 1998 first-half number in that category was up 25.7 percent from 218 in the 1997 period.

There were only 15 filings this year under Chapter 11, which is intended to keep businesses alive long enough to reorganize and get solvent. The Chapter 11 total was 42.3 percent lower than the year-earlier 26.

Many filings are by individuals overcome with credit card debts, said bankruptcy attorney Greg Dunn. "I think credit card companies should have some responsibility," Dunn said, adding that they should pull back on their aggressive marketing.

He said he tells clients bankruptcy should be only a last resort, after they've tried everything else to get out of trouble. But there are also those who fear they'll lose their homes to foreclosure because they've fallen so far behind with the payments, Dunn said. Bankruptcy can help some of them.

Part of the increase in filings may be because bankruptcy has become more acceptable, he said.

Susan Tius, an attorney who often represents businesses and other creditors trying to collect from other business and individuals, said she has noticed a trend that might have increased the filings total slightly.

"The majority of cases are still good faith consumer filings," she said, but she is also seeing what she calls "serial filings."

That's when someone files, using the law's instant halt to collection efforts, and later withdraws the action once court processes are starting.