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Jax Daily Record Thursday, Jul. 14, 201112:00 PM EST

Bankruptcy rate down 15% at midyear


by Karen Brune Mathis

Managing Editor

At the year’s midpoint, the pace of bankruptcy filings is down 15 percent from last year’s record rate in the U.S. Bankruptcy Court Middle District of Florida.

The annual pace in the district’s Jacksonville division also is down, running 14 percent slower than last year.

Whether that pace continues could depend on what happens with foreclosures, which slowed in the wake of questions about proper signatures on paperwork.

“As many financial institutions emerge from the foreclosure paperwork scandal, I suspect that foreclosure filings will rise to a level more similar to that of the past couple of years,” said Mark Mitchell with the Akerman Senterfitt firm and president of the Jacksonville Bankruptcy Bar Association.

“Based upon this scenario, together with recent data supporting a weaker-than-expected job market, as evidenced by the employment numbers announced last week, I suspect that bankruptcy filings, especially individual and small business filings, will increase,” he said.

The U.S. Labor Department reported that the national unemployment rate was little changed in June at 9.2 percent.

Nina LaFleur of the LaFleur Law Firm in St. Augustine said her practice experienced a slowdown during the spring.

“We attribute that to the hiatus of foreclosure filings due to robo-signers and related legal issues,” she said.

“As the banks engage new counsel and implement new procedures, we believe that the foreclosure activity will resume, followed by increased bankruptcy filings,” said LaFleur, a member of the Jacksonville Bankruptcy Bar Association board of directors.

She doesn’t expect a return to last year’s volume, however.

In the Jacksonville division, the average monthly filings are down to 824.5 this year from 953.3 last year and 928.7 in 2009.

The recession’s toll has been clear in the trends.

For the full year, Middle District bankruptcy filings rose from 15,304 in 2006 to 61,690 in 2009 and peaked at 66,618 last year. The pace so far in 2011 is about 56,450.

Bankruptcy attorneys attributed last year’s record rate to effects of the 2007-09 recession and the credit crisis.

Unemployment reached double-digits and consumers and businesses, especially those associated with real estate, faced particularly tough times.

The national recession ended two years ago. The Florida recession didn’t end until early 2010, economists have said.

“The economy will not improve for many years, so we are looking to the eventual increase in filings,” said LaFleur.

She said her firm is making efforts to increase its community presence, including giving presentations to civic and social groups about “Busting Bankruptcy Myths.”

“There is still so much misinformation out there that we have found the audiences to be very receptive to learning the story about bankruptcy and how much relief it can provide,” she said.

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-June fell almost 16 percent from last year to this year, with 927 fewer filings.

At the six-month rate, the division could end the year at just under 10,000 filings, compared with last year’s 11,439.

In the Middle District, filings are down 17.2 percent in the first half of the year. Filings were down by 5,877.

If filings remain at the six-month pace, the Middle District could end the year with about 56,500 bankruptcy petitions, down almost 10,000 from last year.

Among the Middle District filings:

• Chapter 7 liquidations were down 16.4 percent, while continuing to account for 75 percent of all filings. Businesses and individuals use Chapter 7.

• Chapter 11 reorganizations fell almost 29 percent. While dominated by businesses, bankruptcy lawyers say high-wealth individuals are also seeking protection under the chapter.

• Chapter 13 wage-earner reorganizations are down 19.2 percent. The fillings account for 23 percent of all filings.

Chief Bankruptcy Judge Paul Glenn in the Middle District said recently that as the recession began in late 2007, 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.

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Jacksonville-June bankruptcy filings
Jacksonville Division, U.S. Bankruptcy Court, Middle District of Florida

Year Six-month filings Annual
2011 4,947 9,894 (pace)
2010 5,874 11,439
2009 5,481 11,144
2008 3,862 8,412
2007 2,803 6,015
2006 1,948 4,184

Source: U.S. Bankruptcy Court

January-June filings
Chapter 2006 2007 2008 2009 2010 2011
Chapter 7 3,978 6,720 12,780 21,537 25,458 21,289
Chapter 11 51 103 205 308 440 312
Chapter 12 2 3 1 11 15 9
Chapter 13 2,812 4,659 6,535 7,616 8,190 6,616
Chapter 15 0 0 1 0 1 1
Total 6,843 11,485 19,522 29,472 34,104 28,227
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: US. Bankruptcy Court

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