Once wealthy, but now hit by bankruptcy

PUBLISHED : Saturday, 18 April, 2009, 12:00am
UPDATED : Saturday, 18 April, 2009, 12:00am

Personal bankruptcies rose to a five-year high last month - and an increasing number of those were wealthy people battered by the global financial crisis.

Figures released by the Official Receiver's Office showed 1,872 personal bankruptcy petitions were filed last month, up almost 25 per cent from February. It was the highest since July 2003, when 1,899 bankruptcy petitions were filed in the wake of the outbreak of severe acute respiratory syndrome. The number of petitions for the first quarter of this year was 4,638, up more than 80 per cent on the same period last year.

Tsui Pui-hung, a partner at the law firm Shea and Company, said that an increasing number of the bankruptcy cases that his firm recently handled involved better-off people.

'In the past, many of the clients were lower-income workers. They got into trouble because they could not repay credit card payments. But recently, some of our clients owed their creditors as much as HK$10 million. There was a case of a debtor who owed HK$100 million,' Mr Tsui said.

'Many of these debtors are businessmen who had invested heavily in the financial markets. When the market suddenly turned bad, they found themselves in a difficult financial situation and had to go bankrupt.'

Tse Lin-chung, a partner at the law firm Yip, Tse and Tang, said: 'The economy is still worsening. The March figure is very high. But it is still too early to say if the worst is over.'

But Mr Tse said some banks were willing to consider debt restructuring, especially for cases in which the debts were lower than HK$300,000.

Hang Seng Bank senior economist Irina Fan Yuen-yee said that until there was 'improvement in employment, personal bankruptcies could keep growing'.

Hong Kong's jobless rate worsened to 5 per cent in February, up from 4.6 per cent in January, according to the Census and Statistics Department. The department is expected to release the March figures on Monday.

According to the Official Receiver's Office, the number of bankruptcy orders rose to 1,722 last month, up from 1,675 in February. The number of compulsory winding-up petitions for businesses was 53 last month, the same as in February.