The Original Pancake House was among the debtors filing for bankruptcy in May as the number of cases in the state increased for the second straight month.
There were 92 filings in May, up 37.3% from 67 in the year-earlier period, according to new data from U.S. Bankruptcy Court, District of Hawaii. It was the third time this year that cases had risen from the same time frame in 2022.
“We are coming to the end of the COVID money hangover in the sense that the stimulus and other COVID moneys are close to being completely wrung through the system,” Honolulu bankruptcy attorney Ed Magauran said. “Lenders are also coming out of their slumber and starting to chase the debts that are not being paid and that they were not pursuing due to the national emergency.”
Hawaii bankruptcy cases have remained below 100 cases for 22 of the past 23 months, but Magauran sees that trend reversing.
“More and more folks are getting demands on delinquent debts and starting to think about options to get free,” he said. “This will continue. More cases will be filed.”
The Original Pancake House, whose corporate name is Pancakes of Hawaii Inc., filed for Chapter 11 reorganization in May after closing its Kapiolani Boulevard location in March. The Original Pancake House has one remaining restaurant on Dillingham Boulevard.
Young Acopan, owner of The Original Pancake House, said in a court filing that multiple sewer backups at the Kapiolani location that began in February 2020, soot from another tenant, grease dripping from the ceiling, COVID-19 mandates and the lack of customers from Japan resulted in several temporary closures of the restaurant and ultimately contributed to Acopan shutting down the Kapiolani restaurant.
Kapiolani Associates LLC, landlord for the Kapiolani location, filed an eviction lawsuit in September after Acopan, who signed a 10-year lease in 2018, stopped paying rent amid all the issues. Acopan, who is seeking to reject the lease, had opened the Kapiolani location in 1979 before adding the Dillingham site in 1989.
Acopan said as of a May 24 filing that the company had $390,000 in cash, approximately $170,000 in undisputed trade debt, plus unpaid rent claimed by Kapiolani Associates. She said in a filing declaration that until 2022 she had paid rent at the Kapiolani location for decades without fail and that the restaurant was considered an anchor tenant, averaging about $1.2 million in sales annually prior to COVID-19. The two restaurants used to employ about 33 employees, split evenly between the two locations. There are now about 20 employees remaining.
The Chapter 11 filing by The Original Pancake House was one of two reorganizations filed during May. The other was by ATH Sports Nutrition LLC, which is a direct-to-consumer manufacturer of workout supplements. Chapter 11 filings are primarily for business reorganization. There were no Chapter 11 filings in the year-earlier period.
Honolulu bankruptcy attorney Greg Dunn said he sees cases increasing about 20% this year over 2022.
“With rising inflation, some consumers will be forced into filing for bankruptcy,” Dunn said. “In a recent study by LendingTree, Honolulu ranked as one of the top cities where even people earning six figures might be struggling to make ends meet.”
A family of three in Honolulu making $100,000 a year would need an additional $865 a month to make ends meet for basics including housing and child care, according to the study. The average amount of credit card debt in Hawaii for people carrying a balance is currently $8,556, the study said.
“If someone with a debt load can only pay $200 a month, they will pay significantly more in interest and be paying down the debt for a longer period of time,” Dunn said.
He said rising interest rates from the Federal Reserve have been affecting most credit card users.
“Credit card companies can raise rates with federal increases,” he said.
There have been indications from Fed officials that its Federal Open Market Committee will pause raising interest rates at its June 13-14 meeting following 10 consecutive rate increases.
Magauran said consumers with variable rate loans have been feeling the pinch from rising rates.
“Since early 2022 the Fed has been aggressively raising the rate largely to combat inflation,” he said. ‘This makes borrowing money more expensive. For example, the average credit card interest rate in early 2022 was about 14.5%, and as of February of this year, it was about 20%. So, if the Fed raises rates again, you can expect average interest rates to go up as well. If the Fed thereafter pauses raises, it will hopefully stabilize the interest rate that folks are paying to service their variable rate debts.”
In May, Chapter 7 liquidation cases — the most common type of bankruptcy — increased 34.9% to 58 from 43 in the year-earlier period.
Chapter 13 filings, which allow people with regular sources of income to set up installment payments to creditors over three to five years, rose 33.3% to 32 from 24.
Across the state, bankruptcies were mixed in the four major counties in May. Honolulu filings increased to 77 from 47, and Kauai County filings rose to four from one. Hawaii County filings held steady at six, while Maui County filings fell to five from 13.
SEEKING RELIEF
Bankruptcy filings in May rose from a year ago.
2023 2022 PCT. CHANGE
Chapter 7 58 43 34.9%
Liquidation
Chapter 11 2 0 —
Business reorganization
Chapter 13 32 24 33.3%
People with regular sources of income set up plans to pay creditors over time.
Total 92 67 37.3%
Source: Star Advertiser
