Karen Brune Mathis
Bankruptcy filings in the Middle District of Florida continued in August toward a record rate this year. The January through August filings exceeded last year’s eight-month total by 12.5 percent, according to the U.S. Bankruptcy Court.
Chapter 7 liquidations rose almost 15 percent and Chapter 11 reorganization filings shot up nearly 29 percent.
“With every month that goes by, there is an additional group of people that have depleted all their remaining resources and reached the end of the financial rope,” said attorney Robert Wilcox, with the Brennan, Manna & Diamond firm.
The U.S. Bankruptcy Court Middle District covers 35 of the state’s 67 counties, including the major metropolitan areas of Jacksonville, Orlando, Tampa, Fort Myers, Ocala and Daytona.
Total bankruptcy filings totaled 45,600 from January-August in the Middle District, up from 40,536 last year.
At that pace, the Middle District could log 68,400 filings this year, up from 61,690 last year and more than the 63,778 in 2005, the year laws where changed to make it more difficult to file.
The total could be higher, given that last year’s total ended up higher than the pace set during the first eight months.
“Our bankruptcy cases have started to pick back up just as expected,” said attorney Jason Burgess with The Law Offices of Jason A. Burgess LLC.
“I concentrate on Chapter 11 cases and have met with numerous businesses and individuals over the past month. I see the next few months being very busy and certainly on track for a record year,” said Burgess.
Filings in the Jacksonville division, consisting of 16 counties including Duval, rose 6 percent to 7,886 for the eight months. That rate indicates a potential 11,829 filings this year, exceeding 11,144 last year.
However, that is below the totals in 2004 and 2005.
Bankruptcy attorneys said unemployment and real estate issues, including foreclosures, are among the top factors leading clients to file. The national economy continues to struggle from the recession that began in December 2007 and has not been declared officially over, although some economists believe a slow recovery began in summer 2009.
“There are certainly many factors leading to the increase in bankruptcy case filings, including continued weakness in the job market,” said Wilcox.
Unemployment nationally, statewide and locally continues to hover near 10 percent or higher.
“There is a real ‘wealth factor’ issue at work here. People usually equate their feeling of how well off they are with the value of their houses, and the drop in house values has made a lot of people feel poorer than they did and very concerned about the future,” he said.
Wilcox provided an example.
“Having $30,000 to $50,000 of credit card or auto debt feels manageable if you have $150,000 in equity in a home, but when that $150,000 evaporates, that debt becomes a huge burden that cannot be handled,” he said.
Wilcox said businesses have many of the same issues as individuals because they traditionally had been able to borrow against real estate, receivables or equipment, or to sell them to raise cash.
“Now the values of those assets have dropped and banks won’t lend against them and no one wants to buy them. And that’s true of almost any kind of asset you can name,” said Wilcox.
Wilcox represents former Jacksonville Jaguars quarterback Mark Brunell in his Chapter 11 filing. Brunell cited real-estate investments and related debts in his petition.
Businesses also have been having trouble collecting receivables from customers because customers also have financial problems.
Wilcox made another observation. “This is also the first time I can think of in which business borrowers are having to look at the financial viability of their lender, because so many smaller banks are under their own financial constraints,” he said.
“A lot of business borrowers have ended up with the FDIC (Federal Deposit Insurance Corp.) looking over the shoulder of their lender, and that tends to reduce the flexibility that bankers in Jacksonville have shown,” he said.
The FDIC is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system.
In a closer look at the January-August filings in the U.S. Bankruptcy Court Middle District of Florida:
• Chapter 7 liquidations totaled 34,064, up from 29,746 in 2009 and up from 5,628 in 2006, the year after the stricter bankruptcy laws took effect.
• Chapter 11 reorganizations, primarily by businesses, rose to 550 this year from 428 last year, and up from 82 in 2006.
• Chapter 13 individual, wage-earner reorganizations rose to 10,965 from 10,341 last year, and from 3,835 in 2006.
Meanwhile, Chapter 12 farmer and fisherman filings remained even at 20 both years, compared to a total of seven from 2006-2008.
Wilcox also warns of another possible development.
“The remaining shoe to drop is the decline in the commercial real estate market, which has been soft but not disastrous. If that market declines as some bankers and real estate firms expect, and vacancy rates in Jacksonville are around 20 percent, then we will have another problem to deal with,” said Wilcox.