by Karen Brune Mathis
Managing Editor
Chief Judge Paul Glenn of the U.S. Bankruptcy Court Middle District of Florida holds a front-row seat to the economy.
In the district, 11 judges hear the more than 60,000 cases that are being filed annually among the Jacksonville, Orlando, Tampa and Fort Myers divisions.
Glenn, who is based in Jacksonville, was appointed 18 years ago and has watched the factors that affect the decisions by people and companies to file for bankruptcy, whether it’s a Chapter 7 liquidation, Chapter 11 corporate or high-wealth individual reorganization, Chapter 13 wage-earner repayment plan or one of the other lesser-used plans.
Glenn cannot discuss specific cases, but he can discuss the data he researches and collects that pertain to how the Middle District fares. The district covers 35 of the state’s 67 counties and typically ranks in the top five among districts nationwide in the volume of the separate chapter filings.
Glenn said the Middle District is the second busiest in the country behind the Los Angeles district.
In 2010, Middle District filings reached a record 66,618 in the wake of the recession, real estate stall, foreclosure boom, credit crisis and double-digit unemployment.
Filings slowed dramatically after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, but have since risen annually.
Filings in the 16-county Jacksonville division from January-May dropped almost 15 percent from last year to 4,108. In the Middle District, filings were 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.
In the district, Chapter 7 liquidations were down 16 percent, while continuing to account for 75 percent of all filings. Chapter 11 reorganizations fell almost 28 percent and account for about 12 percent of the total.
Chapter 13 wage-earner reorganizations are down 16.6 percent and make up 24 percent of all filings.
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.
Glenn provided a look at the trends.
What is the status of filings?
We are consistently one of the busiest districts in the country because it’s such a large district and has so many people. It stretches from here down to Fort Myers. The main cities are Jacksonville, Orlando, Tampa and Fort Myers, but all of the intermediate cities are included as well: Daytona, Ocala, Sarasota, Lakeland. There are over 10 million in the district. It’s over half the population of Florida, because there are about 18 million people in the state.
It’s a lot of people. It’s a varied area. Jacksonville and Tampa are industrial and financial; Orlando is basically a tourist area — hotels, restaurants, accommodations. Fort Myers is basically a retirement area.
We have different divisions of the court. The mix of cases in those different divisions is different. It’s a very interesting area to follow.
Then there are all the agricultural areas in between them, and those are interesting. Chapter 12 cases are reorganizations for farmers, and we were the nation’s No. 1 district for Chapter 12 cases last year, with 37.
That’s because Pilgrim’s Pride filed bankruptcy in Texas and a lot of their suppliers were here in North Florida.
That’s an interesting distinction to be No. 1 in Chapter 12, with 37.
An interesting distinction, all right, but basically, we are consistently one of the busiest districts in the United States, consistently in the top five, and the second busiest for the last several years.
I have some statistics that I presented to a group at The Florida Bar meeting.
The Middle District of Florida is 35 of the 67 counties. In Florida, over 70 percent of the increase in population comes in the Middle District, which is interesting. Generally — not in these economic circumstances — bankruptcy filings are a percentage of the population.
As the population of Florida increases, then our filings generally increase. It’s pretty consistent along those lines.
But then toward the end of 2007, we started to see the effects of the recession beginning, the real estate-related bankruptcies coming in, the brokers, the agents, the contractors, subcontractors, developers. All that started during 2008.
Then a lot of the regular businesses started coming in during 2009, and now we’ve got a little bit of everything: a chain of radio stations, a lot of the small hotels and motels, and a lot of individuals that bought investment properties in the early 2000s that now either can’t pay debt service or have no equity. They come in and try to restructure the debt.
Total filings last year were 66,000 cases. The largest district is Los Angeles. Chicago is right behind us, then Atlanta, then a good bit more of California, and then Detroit.
How does the Florida Middle District rank in terms of population?
There used to be a website that would have the population by districts. They stopped keeping that current in 2006, but I can tell you that in 2006, California Central had 18 million people, we had 10 million, Chicago had 9 million. Eastern Michigan only has about 6 million, but they had terrible times up there.
What are some of our other rankings?
In total business filings, we’re also second. We’re fourth in Chapter 11s. I was a little surprised at this when I first started following it years ago. Not surprisingly, Los Angeles is always up; New York Southern, that’s Manhattan; Delaware is a national forum, big businesses go there to reorganize. When you get out of the national venues and start looking at the local, we’re the busiest of the local venues.
In terms of the cases per judge, we’re also the second busiest. Detroit is the busiest, because it has fewer judges but tons of filings.
We have eight authorized judgeships, and we have a “recalled” or senior judge and two visiting judges that help us with these 66,000 cases. Los Angeles has 26 judges. On a per judge basis, we are as busy as we can be.
What are the predictions?
The Administrative Office of the Court projects filings for us, and I asked them a couple of years ago to help us plan and these were their projections: Mid-60,000s for the next five years, and we were mid-60,000s for the first of that, a little over their projections. I don’t know what’s going to happen this year.
The 12 months ending May 2011 was up a little bit, a percent over the 12 months ending May last year. But the five months of January through May of this year is down somewhat.
I think it’s going to be level, maybe a little less.
When you talk to the lawyers at the Bar meetings, you hear how the foreclosures in the state courts have slowed a little because of all the foreclosure problems. There is speculation that when the foreclosures pick back up in the state courts, that the bankruptcy filings will pick up.
That’s because 30 percent of our filings in Jacksonville are the kind of filings to save homes, Chapter 7 is liquidation, Chapter 13 is to save a home, Chapter 11 is business reorganization. About 25 to 30 percent of our filings, districtwide and in Jacksonville, are Chapter 13s, so when foreclosures pick up, this will probably pick up.
What are the future filing trends that you see?
It’s difficult to predict. Expect it to fluctuate in the near term. Now, a year or two ago, we were expecting to increase because economic conditions were getting worse. But now it appears that the economic conditions are improving.
I go to the Florida Office of Economic and Demographic Research. They have almost monthly reports and then they have long-range reports.
The job market will take a long time to recover. The recovery won’t be back until 2014, they predict. The foreclosure rate is the third highest in the country. Florida’s recovery begins with flat-to-low growth in the fiscal year ending in June, and more sustainable growth with low levels in 2012.
So I think they’re going to be somewhat level in the near future.
As this research shows, tourism and in-migration are the primary factors in Florida’s economy.
They project that growth is going to be slow because it’s going to follow the improvement in the rest of the country. Tourism is going to begin (to increase), and in-migration will begin a little later.
Trying to put this all together, we’re going to be kind of level. As the population grows, it’ll begin to increase some.
Florida and Jacksonville have been heavily dependent on real estate and construction activities, and you can look at the statistics that show in 2005 and 2006 they were at peak levels, and fell after that. Those numbers are reflected, I’m assuming, in the numbers that you’re seeing, too.
They really are. When we began to get filings as the economy went down, it started with the real estate-related businesses because the real estate business just dropped off.
Bankruptcy attorneys say that they are seeing more individuals filing Chapter 11. What does that tell you?
In general my recollection is that they have more than doubled in the last several years, and that is mainly people that bought investment properties in the boom and now they don’t have renters for them, they can’t meet their debt obligations.
I know you cannot comment on specific cases, but there are a lot of involved, complicated Chapter 11s that are taking place. How long do those usually proceed?
The Chapter 11 reorganizations last a year or more.
You’ve been doing this for how long?
I was appointed in 1993, so I’ve been doing it for 18 years. I was in Tampa for almost 15 years. I commuted to Tampa. Now I’m back here.
I was here to start. I practiced law here and in Miami, and was back here practicing law when I was appointed.
Tell me a little about the change in the consumer filings from the 2005 bankruptcy law.
That got so much publicity. There were a couple of things that happened, and one was that there was the general idea among a large group of the population that bankruptcy was not going to be available. I think that there was the widespread belief, and in fact I have some information that kind of confirms that. It also created several complexities in filing, and so the lawyers had to become accustomed to it as well.
There was this terrific surge in filings right before that. It was effective Oct. 17. The filings in September and October (2005) were just gigantic. Then in November they just dropped off.
Then as people began to realize that bankruptcy was available and lawyers got used to it, they began to increase. Not dramatically, they just began to increase.
Then toward the end of 2007, as the recession began, everybody was aware that bankruptcy was available, and they started to pick up again.
We would have had increases without the recession, because you can see how in the good times, there were a lot of filings.
You see the economy from a very specific point of view. Is it getting better?
From all I can tell, it is getting better. I base that on the fact that the job markets, although they’re increasing slowly, are increasing.
From what I see, for the last 12 months, our filings are only up 1 percent as opposed to how much they increased before that. For the first five months of this year, they are down. I think the economy is getting better. Slowly.
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