Bankruptcy filings continue to decline in Jacksonville and in the Middle District of Florida, dropping to the lowest levels in five to six years after peaking in 2010.
Filings in the 16-county Jacksonville Division dropped almost 10 percent in the first quarter of 2013 from the year before and fell almost 28 percent from the first quarter of 2010, when the recession permeated the economy and bankruptcy petitions reached records.
In the first quarter, from January through March, 2,019 bankruptcy cases were filed in the Jacksonville division, the lowest number since 1,787 were filed in 2008.
At the first-quarter pace, the division could end the year with 8,076 filings, the lowest since 6,015 in 2007.
Similarly, first-quarter filings in the 35-county Middle District of Florida were down 12 percent over the year and 36 percent from the record.
In the district, the 10,365 quarterly filings were the lowest since 2008.
Chapter 7 liquidation filings in the first quarter were the lowest since 2008 and Chapter 13 wage-earner repayment filings were the lowest since 2007. Chapter 11 filings tied those in 2009.
While economic indicators continue to show the economy is recovering from the national recession that began in December 2007 and ended in June 2009, bankruptcy lawyers say factors remain in play for more filings.
"We had a relatively slow January and February for Chapter 11 matters but were absolutely bombarded in March and are still playing catch-up on the new filings," said Jason Burgess of The Law Offices of Jason A. Burgess LLC.
Burgess is vice president of the Jacksonville Bankruptcy Bar Association.
"I have also noticed that even though we have fewer filings we certainly have more litigious cases that require many more hours," he said.
He said creditors and debtors "are both fighting more on issues that seemed to settle a few years ago. It seems each side is trying to get every penny they can out of the bankruptcy."
Burgess said Chapter 11 bankruptcy cases are a little slower "because lenders seem to be working out at least temporary deals with businesses to keep them going. In my recent experience the banks are extending loans for a year or so on better terms to see if the business will pick up in the next year."
However, Burgess said that while businesses appreciate interest-only payments for the year, "it appears to only be a temporary fix. Revenues do not appear to be increasing enough to make the new higher payment that is coming in a year and certainly are not at a level for the business to pay off a balloon or refinance."
Burgess anticipates more "steady years to come" for bankruptcy filings because of the still-slow economy and the temporary loan extensions.
Nina LaFleur of the LaFleur Law Firm in St. Augustine said the economy has not fully recovered.
"We do not see the economy recovering for some time," said LaFleur, a director of the Jacksonville Bankruptcy Bar Association.
LaFleur said she believes the decline in bankruptcy filings is due to the temporary slowdown of foreclosures while lenders "sort out their issues and get their paperwork in order."
"The dockets for the Circuit Courts continue to show repeated cancellations of foreclosure sales and rescheduling of foreclosure hearings," she said.
"There are still many, many foreclosures in the pipelines which will eventually be processed," she said.
LaFleur said another factor is that not all banks pursue deficiency judgments.
"When an individual is faced with an actual collection lawsuit, they are prompted to take some action, such as filing bankruptcy. Without the threat of a lawsuit, many homeowners are not doing anything," she said.
"Once the banks fire up their deficiency collections, we will certainly see an increase in filings," she said.
LaFleur said banks appear to be reluctant to move forward with foreclosures.
"Many clients have been living in their homes, without making payments, for three years or more. Often, it is not until the banks take action that then causes the homeowners to take action," she said.
"We believe there is a substantial shadow inventory of bankruptcy cases that will be filed," she said.
She said another factor is that "many folks are too broke to go bankrupt. With no equity in their home or their vehicles and no available cash, they are living paycheck to paycheck and are virtually judgment proof," she said. "They do not see any reason to file."
Economic growth and uncertainty
Paul Mason, an economics professor at the University of North Florida Coggin College of Business, told the Jacksonville Bankruptcy Bar Association last week that the economy is improving.
"Things are getting a little bit better," he said in a presentation to the group a week ago at The River Club.
"There is light at the end of the tunnel," he said.
Mason also cautioned about what he calls the "black swans" of forecasting, which are variables that are difficult to predict but that can have great impact on the economy.
He said the "black swans" include the unpredictable nature of the European debt crisis, the Affordable Care Act he referred to as "Obamacare," taxes, interest rates, the deficit and the federal debt, and the real estate market.
Among other analyses, Mason said gross domestic product, the sum of all the goods and services produced in the country, grew by 2.2 percent last year, up from 1.8 percent in 2011.
However, he said 2.5-3 percent growth is optimal in normal economic expansions and 5-6 percent growth for at least three consecutive years would be necessary to return the country to full employment.
Mason predicts GDP growth will remain below 3 percent this year and be "only a little better" next year because of:
"The reluctance of businesses to hire and invest, interest rates that are too low, regulatory constraints that are too stringent to motivate lending, the stifling debt and deficit relative to public sector growth, the slowing Chinese economy, and the weakness in Europe."
Douglas Neway, a director and former president and chairman of the Jacksonville Bankruptcy Bar Association, referred to the uncertainty in the economy outlined by Mason.
"Considering the information that Professor Mason shared, it doesn't look like anyone knows what direction we're headed," he said.
"The job numbers look favorable; the federal debt and deficit numbers look awful; there apparently is the potential for hyperinflation and recession and possibly stagflation. And there's lots of uncertainty," said Neway, the Chapter 13 Standing Trustee of the U.S. Bankruptcy Court Middle District of Florida Jacksonville Division.
Forbes ranks city No. 3 for jobs
One positive indicator is that Jacksonville made the Forbes list of "The 10 Best Cities For Finding Employment Right Now."
Ranking Jacksonville No. 3, behind Bethesda, Md., and Austin, Texas, Forbes said:
"No 3. Jacksonville is another example of city with a diverse and highly educated labor force. With unemployment at 6.5 percent, Jacksonville is seeing the heaviest hiring in higher education, health care, IT, food services, transportation and logistics, and government work from the city's three military bases."
Forbes said the human resources firm Adecco Staffing U.S. looked at U.S. cities with the fullest employment, according to the U.S. Department of Labor, as well as internal data about job growth and demand to determine which areas are the best for finding a job.
It said the ranking reflects considerations such as the diversity of industries in a city; the cost of living; the range in size of companies offering employment; and a high level of education among its residents.
"Jobs are being added in Jacksonville because of the recent addition of several companies and headquarters that are new to the area, including finance and manufacturing companies," said Sam Gillespie, an Adecco branch manager, in the Forbes report.
"The IT job market has been hot throughout the city with the addition of these companies," Gillespie said.
Forbes reported that the top industries hiring in Jacksonville were IT, education and health care and that the top skills and jobs in demand were administrative, call center and food service and hospitality.
Area unemployment rates decline
Unemployment rates indeed are dropping in Northeast Florida.
The unemployment rate in the five-county area fell to a seasonally adjusted 6.63 percent in March from 7.03 percent in February and from 8.56 percent in March 2012. The unadjusted rate was 6.5 percent.
The five counties comprise Baker, Clay, Duval, Nassau and St. Johns.
The rate in Duval County fell to seasonally adjusted 7.1 percent from 7.53 percent in February and 9.05 percent in March 2012.
Mason adjusted the rates, reported Friday by the state, for seasonal factors.
"Despite the rise in new claims for unemployment insurance last month, the employment sector overall is improving," he said.
Looking more closely at the five-county metropolitan area:
• The March labor force, defined as people working and looking for work, was 696,146, up slightly from February and up by 7,618 from March 2012.
Employment was up by 4,121 over the month and 21,035 over the year. There were 650,979 people employed in March.
Unemployment was down by 3,986 over the month and down by 13,417 over the year. There were 45,167 people unemployed in March.
Looking more closely at Duval County, which comprises 64 percent of the five-county labor force:
• The March labor force was 447,273, up slightly over the month and up by 4,773 over the year.
Employment was up by 2,635 over the month and by 13,451 over the year. There were 416,275 people employed.
Unemployment was down by 2,536 over the month and by 8,678 over the year. There were 30,998 people unemployed.
The labor force does not include discouraged workers or others who are not seeking a job.
In his presentation to the bankruptcy association, Mason said area unemployment peaked in 2009 at almost 12 percent.
Mason said the economy needs more major companies to start hiring again, especially among the middle-management ranks to provide higher salaries and also create a conduit to upper management.
And, "we have to expand small businesses."
Asked to explain why he suggests interest rates need to go up, he said incentives were needed to "to get borrowing and investment going by having firms try to beat rate increases."
In summary, he said:
"I think what we need is a kick in the butt."
1Q bankruptcy filings
Jacksonville Division, U.S. Bankruptcy Court, Middle District of Florida
* Annual rate based on first-quarter filings
Source: U.S. Bankruptcy Court
1Q bankruptcy filings
Middle District of Florida
Chapter 7 – Liquidation
Chapter 11 – Corporate or high-wealth individual reorganization
Chapter 12 – Farmer, fisherman reorganization
Chapter 13 – Individual, wage-earner reorganization
Chapter 15 – Insolvency involving more than one country
Source: U.S. Bankruptcy Court
*annual rate based on first-quarter filings
The glossary at uscourts.gov provides these definitions:
Chapter 7: The chapter of the U.S. Bankruptcy Code providing for "liquidation," that is, the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors. In order to be eligible for Chapter 7, the debtor must satisfy a "means test." The court will evaluate the debtor's income and expenses to determine if the debtor may proceed under Chapter 7.
Chapter 9: The chapter of the Bankruptcy Code providing for reorganization of municipalities, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities and school districts.
Chapter 11: A reorganization bankruptcy, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. Individuals or people in business can also seek relief in Chapter 11.
Chapter 12: The chapter of the Bankruptcy Code providing for adjustment of debts of a "family farmer" or "family fisherman," as the terms are defined in the bankruptcy code.
Chapter 13: The chapter of the Bankruptcy Code providing for the adjustment of debts of an individual with regular income often referred to as "wage-earner" plan. Chapter 13 allows a debtor to keep property and use his or her disposable income to pay debts over time, usually three to five years.
Chapter 15: The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.