by Karen Brune Mathis
As predicted by bankruptcy lawyers, filings in the U.S. Bankruptcy Court Middle District of Florida remained at a record pace through September, tracking to top 68,300 for the year.
That’s 7 percent higher than the record of almost 63,800 filed in 2005 as bankruptcy laws changed.
The Middle District filings, which include the Jacksonville Division, for the first three-quarters of the year totaled 51,232, up 11 percent from last year’s nine-month period.
However, that is a slower pace than the 12.5 percent increase during the first eight months over the year before.
Meanwhile, Chapter 7 liquidations rose 13 percent and Chapter 11 reorganization filings were up 25 percent in the first nine months, which also were slower rates than the first eight months.
“I think that the recent slowdown, be it ever so slight, is due to a number of things,” said Jerrett McConnell, past president and current chair of the Jacksonville Bankruptcy Bar Association.
McConnell, with Friedline & McConnell, said that the combination of a state Attorney General investigation into several large foreclosure firms regarding alleged fraudulent documentation to speed up the foreclosure process, along with the mandatory mediation process in foreclosure situations and the temporary freeze on foreclosures by three of the big banks all play a role.
“All these factors combine to give hope to those who are struggling to keep their homes,” said McConnell.
“Ultimately, it may be false hope, but it is hope nonetheless. The reality that many people are trying to ignore is that they just don’t have the income to sustain their lifestyles, even if their mortgage payment is reduced through modification,” he said.
McConnell said he attended a creditors meeting for a debtor whose income dropped from $800,000 three years ago to $100,000 now. McConnell said it was hard to conceive of a mortgage modification that would make up for a $700,000-a-year loss in income.
He said that may be an extreme example, but a more common situation is that of one of his clients who went from $100,000 a year in income from a sales job to $35,000 a year working in fast food.
“He wants to pay his bills. He wants to keep his home. He still holds out hope that things will change. But sooner or later, reality catches up with him and he realizes that his only chance for a better future is cut his losses in bankruptcy and start over,” said McConnell.
Lawyer Jason Burgess said filings do seem to be a bit slower this year compared to last year this time.
“Usually around September or October, bankruptcy filings pick up a little bit after the slower summer months where financial strains are the furthest from people’s minds,” said Burgess, secretary of the Jacksonville Bankruptcy Bar Association.
“However, I have met with quite a few businesses and individuals over the last few months that seem to be getting ready to file, but just have yet to fully commit. It could be a sign of the market,” he said.
“Bankruptcy is so publicized now people may be trying to do their own research and make more informed decisions. It could also be a little slower because there are a lot of attorneys that now file bankruptcy petitions. This gives individuals and businesses the chance to shop around or find an attorney that they feel comfortable with,” he said.
Burgess, with The Law Offices of Jason A. Burgess, said he still expects bankruptcy cases to rise through the end of the year.
“We still have more waves of adjustable rate mortgages coming due on residential and commercial loans that will undoubtedly cause financial troubles when coupled with the high unemployment rate.”
Duval County’s unemployment rate rose again in August to a seasonally adjusted 12.57 percent, up from 12.09 percent in July and up from 11.29 percent in August 2009. The five-county Northeast Florida rate is 11.7 percent.
The national economy continues to struggle from the recession that began in December 2007 and was declared over as of June 2009, although unemployment remains high, foreclosures remain heavy and consumers struggle to feel confident.
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.
Filings in the Jacksonville division, consisting of 16 counties including Duval, rose 5.4 percent for the first nine months, to 8,881 petitions. Annualized, that rate indicates a potential 11,841 cases this year, 6.3 percent higher than all of last year.
However, that is below the 2005 total.
Bankruptcy filings have risen steadily and strongly since 2006 in the Middle District and in the Jacksonville Division, according to the court.
For example, the Middle District filings almost quintupled from 10,947 for the first nine months of 2006 to this year. The Jacksonville Division numbers almost tripled from 3,042.
Bankruptcy attorneys said this year that unemployment and real estate issues, including foreclosures, are among the top factors behind clients’ reasons to file.
Businesses also struggle with confidence, according to CEOs and others who claim that uncertainty about federal mandates and other policies restrain them from investment and expansion to create jobs.
In a closer look at the January-September filings in the U.S. Bankruptcy Court Middle District of Florida:
• Chapter 7 liquidations totaled 38,259, up from 33,918 in 2009 and 6,491 in 2006.
• Chapter 11 reorganizations, primarily by businesses, rose to 604 this year from 484 last year and 93 in 2006.
• Chapter 13 individual, wage-earner reorganizations rose to 12,337 from 11,681 last year, and up from 4,361 in 2006.
Meanwhile, Chapter 12 farmer and fisherman filings rose to 26 this year from 25 last year, compared to a total of eight from 2006-2008.