by Karen Brune Mathis
Managing Editor
Judge Paul Glenn, the chief judge for the U.S. Bankruptcy Court in the Middle District of Florida, outlined the rising number of cases and put it in layman’s terms.
“If I were a CEO, I’d say sales were up,” he said.
Glenn and Judge Jerry Funk, who are the two bankruptcy judges housed in the district’s Jacksonville Division, met with members of the Turnaround Management Association Tuesday evening.
Glenn presented statistics that show the Middle District is second in the nation, behind the Los Angeles area district, in bankruptcy filings for July 2009-June 2010.
The Middle District consists of 35 of the state’s 67 counties, including Jacksonville, Tampa, Orlando and Fort Myers.
Florida, especially its high-growth and tourist areas, has been hit hard by the real estate collapse, the foreclosure crisis and the drop in tourism.
Glenn said the district’s 66,375 cases came in behind the 129,014 filed in the Los Angeles district.
For Chapter 11 reorganization filings, which have traditionally been business petitions, the Middle District came in No. 4 in the nation, he said.
And with Chapter 12 farmer and fishermen reorganizations, the district remained No. 1 with 37 filings. Many of those have been attributed to the bankruptcy reorganization filing of poultry food processor Pilgrim’s Pride Corp., which has operated a production plant in Live Oak, in the area of the Jacksonville Division.
About 40 lawyers, bankers and other professionals who work with distressed companies and individuals attended for the “State of the Bankruptcy Courts and Hot Chapter 11 Topics” presentation at The University Club.
Glenn also presented future filing trends through 2014, showing a steady annual growth in petitions.
“For turnaround professionals and bankruptcy lawyers, sales will be up the next three to four years,” said Glenn.
Among the Chapter 11 topics, Glenn showed that the number and share of individuals filing under that chapter have grown in both the district and the Jacksonville Division.
In the district, 25 of the 189 Chapter 11 filings from July 2004-June 2005 were individuals, for a 13.2 percent share.
That rose to a 31 percent share in 2009-10, as 231 of the 748 Chapter 11s were made by individuals.
In the Jacksonville Division, six of the 52 Chapter 11 filings in 2004-05 were individuals, an 11 percent share.
That soared to 41 percent in 2009-10, when 73 of the 179 Chapter 11 filings were individuals.
Glenn said that 75 percent of those individual filings were associated with investment properties, which dropped in value dramatically in the recession. Before the meeting, some of the attorneys talked about seeing more businesses in the service industry filing for Chapter 11 as customers scale back on their lifestyle spending.
“It is very cumbersome for an individual to file Chapter 11,” said Funk. Not only that, “it’s a lot more expensive.”
Individuals with higher wealth file Chapter 11 to reorganize their debts. Individuals with lower wages or who have no funds file a Chapter 13 wage-earner plan or liquidate under Chapter 7.
The judges were asked about Ponzi schemes, also known as pyramid schemes, which are fraudulent investments promising high rates of return with little risk.
Glenn said that as the stock market sank, the schemes emerged to take advantage of investors anxious to make money.
Glenn said that the stock market hit its all-time high of 14,164 in October 2007 and plummeted to the 6,600 level in March 2009. “That caused investors to liquidate assets,” he said, and the Ponzi schemes arose.
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Florida’s economy
U.S. Bankruptcy Court Chief Judge Paul Glenn refers to The Florida Legislature’s Office of Economic and Demographic Research for the state’s economic overview. It issued a review Nov. 2. In summary:
• The Florida job market will take a long time to recover. About 862,100 jobs were lost since the peak.
• Florida’s prime working-age population of 25-54 should grow by about 1,200 people a month, so the hole is deeper than it looks.
• It would take creation of almost 909,000 jobs to reach the workforce participation level as at the peak.
• Florida’s population is 18,772,352 in 2010.
• The population is forecast to reach 23,811,183 by 2030.
• Florida’s economic recovery began in the current fiscal year with flat to low growth.
• Florida should reach low-normal growth in fiscal 2011-12.
• The recovery will be uneven with ups and downs the next 12 months.
• Because of Florida’s diverse economy, areas will differ in their recovery. Areas affected by the oil spill will face different challenges.
• Unknowns include commercial real estate defaults; more bank failures; hurricanes; and a possible double-dip recession.
• Foreclosure filings are daunting.
Source: Florida Legislature’s Office of Economic and Demographic Research