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Bankruptcy filings in Jacksonville just about tripled last year from 2006, a different economic time and place before the deep recession took hold in late 2007.
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Bankruptcy filings
Jacksonville Division
U.S. Bankruptcy Court
Middle District of Florida
2009 — 11,144
2008 — 8,412
2007 — 6,015
2006 — 4,184
Source: U.S. Bankruptcy Court
“I do not think it is over yet,” said Stephen Busey, chairman of the Smith Hulsey & Busey law firm. “We have not seen the end of the consequences of the high unemployment and the exhaustion of personal savings.”
Unemployment rates in the nation, Florida and Jacksonville hover at or near the double-digit range.
Filings in the U.S. Bankruptcy Court for the Middle District of Florida quadrupled from about 15,300 in 2006 to 61,690 last year.
The district numbers come from filings in the district’s locations in Jacksonville, Orlando and Tampa.
Filings in Jacksonville nearly tripled from 4,184 in 2006 to 11,144 last year.
For the first two months of 2010, the situation is not much better. Filings again almost tripled to 1,583 in January and February from the first two months of 2006.
“Job losses and the housing bubble are the drivers behind why we are seeing more filings,” said Gardner Davis, a partner in the Foley & Lardner law firm.
Busey said “the deepest recession since the Depression, coupled with the fallout of the over expansion of the housing market from 2003 to 2007” led to the increase in bankruptcy filings.
“Thinking the bubble was never going to burst, and prices were going to continue to rise, people drove housing prices past reality, borrowing heavily, including home equity loans,” he said.
The bubble burst in 2007 and the recession followed. “Unemployment rose, borrowers could not make their mortgage payments and could not sell their houses, foreclosures followed at record rates, resulting in the wave of bankruptcies,” said Busey.
Chapter 7 is liquidation of assets. While debtors can retain some exempt property, the remaining assets are distributed by a bankruptcy trustee to creditors.
Chapter 13 is designed as a repayment plan for individuals with regular income who will repay part or all of their debt over an extended period.
Chapter 11 allows companies, partnerships and some individuals who don’t qualify for Chapter 13 to reorganize the business and present a repayment plan to creditors for acceptance. The plan then is approved by the court.
For the middle district, Chapter 7 filings quintupled from 9,012 to 45,532. Chapter 11 reorganizations also quintupled from 126 and 648. Chapter 13 filings almost tripled to 15,473.
Busey said the recession took a direct toll on businesses.
“Just look at the closed stores and dealerships along any commercial strip, resulting in more Chapter 11 filings,” he said.
Busey said that the Chapter 11 filings by Amelia Island Plantation and the Sawgrass Marriott ownership “are but two recent prominent examples that expressly blame the recession in their filing papers.”
Both properties continue to operate as they reorganize under Chapter 11.
The investment partnerships that own the Sawgrass Marriott Golf Resort & Spa in St. Johns County filed for Chapter 11 recently after the property’s lender decided to foreclose rather than negotiate a restructuring.
The owner of the Amelia Island Plantation in Nassau County filed Chapter 11 as it works with an investor group that wants to provide funding to help the property through the recession.
It’s notable that bankruptcy laws were changed in 2005 to make it more difficult to file. After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the number of cases dropped dramatically in 2006, but have again been on the rise.
“The reform act was passed to make it harder for individuals to file,” said Davis. “They put a lot of things in it to discourage people.”
He said that bankruptcy lawyers became more comfortable with the process. Then came the recession.
Anna Brosche, a certified public accountant with Ennis, Pellum & Associates, said she has not seen an increase in bankruptcy filings among the firm’s clients.
She has, though, seen the businesses deal with the economic challenges, including “clients having to make tough choices related to managing cash flow, whether or not to retain employees and where to best spend their dollars.”
Brosche said she would advise any business owner considering bankruptcy to seek guidance from a financial expert, leaving “no stones unturned.”
“An outside expert not having the emotional tie to the financial circumstances the business owner is facing might be able to offer solutions or adjustments that aren’t clear to someone trying to decide which of the bills is more important this week,” Brosche said.
While filing might be the ultimate solution, she said that bankruptcy brings long-term challenges to the business and its owner.
“The implications of filing bankruptcy,” she said, “are difficult to recover from and have far-reaching tentacles.”
Middle District of Florida Jacksonville, Orlando, Tampa
Source: U.S. Bankruptcy Court
U.S. Bankruptcy chapters
Chapter 7 — Debtors are permitted to retain certain exempt property while the remaining assets are liquidated by the trustee. The trustee will distribute the funds from the liquidation to creditors in accordance with the provisions of the U.S. Bankruptcy Code.
Chapter 13 — Designed for individuals with regular income to repay a portion or all of their debt over an extended period of time. Chapter 13 may be appropriate for debtors who seek to retain certain assets through a repayment plan.
Chapter 11 — Allows corporations, partnerships and certain individuals who do not qualify under Chapter 13 to reorganize without having to liquidate all assets. As in a Chapter 13, the debtor is required to present a repayment plan. If the plan is accepted by the creditors and subsequently approved by the court, the debtor can reorganize personal, financial or business affairs.
Chapter 12 — Similar to Chapter 13, but applies to some family farmers and fishermen.
Chapter 15 — Pertains to insolvency cases that involve more than one country.
Source: U.S. Bankruptcy Court, U.S. Federal Courts
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