by Karen Brune Mathis
Bankruptcy filings are down the first five months of the year in the U.S. Bankruptcy Court Middle District of Florida and the Jacksonville Division from last year’s record rate, although the final numbers might close some of that gap.
Middle District Chief Bankruptcy Judge Paul Glenn said Tuesday that filings could reach about 64,000 this year, down from the record 66,618 last year.
That would be a drop of 3-4 percent, but the final number would still be higher than in previous years.
“It’s a difficult financial time,” Glenn said after the annual meeting of the Jacksonville Bankruptcy Bar Association.
A review of monthly filings the past two years shows that the largest number of monthly filings is made from March-July.
The recession’s toll is clear in the trends.
Middle District bankruptcy filings rose from 15,304 in 2006 to 61,690 in 2009 and then hit almost 67,000 last year.
The recession took hold in 2007 and was declared over in mid-2009.
In 2006, the economy was still strong and it also was the year after bankruptcy laws changed to make it more difficult for some people to file.
The “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” was a major change to U.S. bankruptcy laws. The act created stricter bankruptcy eligibility requirements for consumer debtors.
Glenn said there are signs of improvement in employment and that housing foreclosures have been held down, but that times continue to be tough.
Foreclosures slowed after the discovery that some lenders were processing actions without the proper signatures.
Bankruptcy attorneys attributed last year’s record filings to fallout from the 2007-09 recession and the credit crisis, resulting in double-digit unemployment and a financial spiral for consumers and businesses, especially real estate developers, contractors and investors.
While the national recession ended in mid-2009, economists said the recession in Florida, which was rocked by its economic reliance on real estate, didn’t end until early 2010.
The Middle District encompasses 35 of the state’s 67 counties and covers the major metropolitan areas of Jacksonville, Orlando, Daytona, Tampa and Fort Myers.
The Jacksonville Division covers 16 North Florida counties.
Filings in the Jacksonville division from January-May dropped almost 15 percent from last year to 4,108. That’s 711 fewer filings. At that pace, the division could end the year at fewer than 10,000 filings, compared with last year’s 11,439.
In the Middle District, filings are down 16.3 percent in the first five months compared with last year’s January-May period. Filings fell by 4,570 to 23,487.
If filings remain at the five-month pace, the Middle District could end the year with about 56,400 bankruptcy petitions, down almost 10,000 from last year.
Among the Middle District filings:
• Chapter 7 liquidations were down 16 percent, while continuing to account for 75 percent of all filings. Businesses and individuals use Chapter 7.
• Chapter 11 reorganizations fell almost 28 percent. While dominated by businesses, bankruptcy lawyers say high-wealth individuals are also seeking protection under the chapter. Chapter 11 filings are about 12 percent of the total.
• Chapter 13 wage-earner reorganizations are down 16.6 percent. The fillings account for 24 percent of all filings.
Glenn said the Middle District is the second-busiest in the country behind the Los Angeles district.
Looking at the individual chapters, the Central California district also is No. 1 in the major categories, while the Florida Middle District ranks within the top four.
In Chapter 11, the Florida Middle District is No. 4, behind Central California, Southern New York and Delaware.
In Chapter 7, the Florida Middle District is No. 3, behind Central California and Northern Illinois.
In Chapter 13, Florida’s Middle District is No. 2, behind Central California.
Florida’s economic reliance on real estate, tourism and agriculture are given as reasons for its continued high levels of bankruptcy filings.
Glenn provided a look at the trends. In late 2007, as the recession took hold, the court saw filings by real estate-related petitioners, such as construction companies, subcontractors, developers and related entities.
Then small businesses began filing, followed by more individuals who are invested in real estate and can no longer carry the debt because they can’t sell the properties or make enough rental income from them.
There recently has been a string of filings by owners of economy hotels.
Glenn said he didn’t know how long the high level of overall filings might continue. “With the recovery, things will begin to decrease,” he said.
However, even then the filings might continue. Glenn said the Middle District filings have always been numerous because they represent a percentage of the population. If the economy recovers and population grows, so could the number of filings.
Glenn said he watches statistics and reports for the Middle District so he can anticipate the court’s needs. Some of those reports, especially those covering real estate, continue to show problems in the Florida markets.
For example, he cited a RealtyTrac summary of properties across the country in foreclosure at the end of 2010 that showed nine of the top 30 markets were in the Middle District.
Also, the district contained three of the 10 job markets considered by one online tracker as the most difficult for job seekers, including Jacksonville.
“It’s an interesting time,” said Glenn.
Jacksonville bankruptcy filings
Jacksonville Division, U.S. Bankruptcy Court, Middle District of Florida
Middle District January-May filings
Chapter 12 – Farmer, fisherman reorganization Chapter 13 – Individual, wage-earner
reorganization Chapter 15 – Insolvency involving more than one country
Source: U.S. Bankruptcy Court