Intra-state bankruptcy rates are on the rise for the first time in 16 months.
Hawaii had 106 bankruptcies in August 2022, up 21.8% from the same month last year. The number of bankruptcies was double digits for 13 consecutive months until July, but it changed to triple digits from August.
Greg Dunn, an attorney who runs a bankruptcy law firm in Honolulu, said that as the government’s stimulus package ended, the likelihood of financially struggling households going bankrupt increased.
Blake Goodman, an attorney at another bankruptcy law firm, said that more debt collection lawsuits are being reported in the summer than at the beginning of the year, suggesting that creditors who have endured the pandemic are showing the limits of their patience.
Goodman also predicted that the number of bankruptcies could rise by 2023.
The two lawyers pointed to high inflation (inflation) as the cause of the increase in the number of bankruptcies.
Higher inflation rates increase the financial burden, which in turn adversely affects debt repayment.
In August, the number of Chapter 7, the most common form of bankruptcy, was 68, up 11.5% from 61 in the same month last year.
Chapter 13 bankruptcies, which allow people with regular income sources to plan tax amortization on creditors over three to five years, rose 34.6%, from 26 in August last year to 35 this year.
There were three Chapter 11 bankruptcies in August last year, but none this year, related to corporate restructuring.
Looking at the increase in the number of bankruptcies by county in August this year compared to August 2021, Honolulu increased from 62 to 86, and Kauai increased from three to four.
Hawaii County dropped from nine to six, and Maui from 13 to 10.