The Pulse of Central Florida Real Estate, With a Focus on Luxury

By Richard Burnett-Orlando Sentinel

Personal bankruptcies have roared back to record levels in Central Florida, only a few years after Congress overhauled the nation's bankruptcy law in an attempt to rein in the number of people declaring themselves broke.

Fueled by the worst recession and highest unemployment in decades, bankruptcies in the Orlando area last year exceeded the record set earlier in the decade, before the new law made it tougher for people to erase their debts.

And the region, suffering through one of the longest and deepest housing slumps in the country, is on pace to set another record for bankruptcies this year.

According to data compiled by U.S. Bankruptcy Court in Orlando, bankruptcies in the region jumped to 20,305 last year, an increase of nearly 60 percent compared with 2008. That total also broke the previous record of 17,770 filings set in 2005, when cash-strapped consumers here and across the country rushed to declare themselves insolvent before the new, tougher bankruptcy law took effect that fall.

Orlando's bankruptcy caseload grew at a faster pace last year than Tampa's (up 42 percent) or Jacksonville's (up 32 percent). All three regions are part of the U.S. Bankruptcy Court for the Middle District of Florida.

Nationally, almost 1.5 million debtors filed for bankruptcy last year, a 32 percent increase from 2008. But last year's nationwide total was still almost 30 percent shy of its 2005 record of nearly 2.1 million, according to data compiled by the American Bankruptcy Institute and National Bankruptcy Research Center.

So far this year in Central Florida, more than 7,700 cases have been filed in Orlando's bankruptcy court, records there show. That total, as of April 30, was running 26 percent ahead of last year's record-setting pace.

Almost 97 percent of the region's bankruptcies these days are filed by individuals, rather than businesses, as the sour economy continues to wear on local households.

Lynn Jones (who asked that her first name not be used) said she and her husband filed personal bankruptcy in 2009 as a last resort after absorbing a series of financial blows, including the loss of his construction job.

It fell to Jones, a health-care manager living in Seminole County, to support the family household, which includes her 77-year-old mother, the couple's grown daughter (who moved back in after losing her job) and a granddaughter. Jones took on two side jobs to make more money, but it still wasn't enough.

"I was able to hold it together for a while, but I had to worry about how long it would take before everyone got back on their feet," Jones said, "and how long could I last without doing something [like bankruptcy] that would help our finances."

Jones' story is a familiar one these days, according to Lori Patton, the Orlando bankruptcy lawyer who represented her. Extended-family households are one of the main causes of personal bankruptcy these days, she said, along with joblessness and housing woes.

"We have a lot of multigenerational households now: parents whose children and grandchildren have moved back because of one issue or the other," she said. "The parents may have been doing OK by themselves, but with more mouths to feed, they're just in over their heads."

Nationwide, bankruptcies in the first quarter rose 17.5 percent from the same period last year to 388,148. In March alone, nearly 149,270 cases were filed — the largest monthly tally since the 2005 bankruptcy-reform law took effect.

"The sustained economic pressures of unemployment, coupled with high pre-existing debt burdens, are a formula for consumer filings to surpass 1.5 million" this year, Sam J. Gerdano, executive director of the American Bankruptcy Institute, said in a written statement.

In some cases, the "pre-existing debt" load can be huge, especially for small-business owners struggling to stay afloat, said Jackie Royal, a paralegal and case assistant with the Lake Mary law firm of Jonathan B. Alper.

Royals said a client who owned restaurants in Volusia County had fought to save them by charging business-related expenses on his personal credit cards. By the time he filed for bankruptcy, he had amassed $1 million in unsecured debt, including $750,000 in credit-card balances.

"That's obviously pretty extreme," Royal said, "but we have had a lot of people like that who own their own business who have come to us with some pretty big personal debt."

Patton said many individuals trying to fend off insolvency wipe out their savings, withdraw retirement funds and max out their credit cards in hopes they can turn things around. Too often those people end up in worse shape than if they had taken action earlier, she said.

Jones and her husband filed a Chapter 13 bankruptcy, which enabled them to restructure their personal debt and their delinquent mortgage so that they matched their current income.

That made it worth dealing with the stigma of a bankruptcy filing and the knowledge their credit will be damaged for years, Jones said.

"I figured that, yes, it'll affect our credit for a while, but so what? We will be hanging on to our house and having a roof over my family's head," she said. "It's also relieved the stress of all the harassing calls that come with being in debt. I feel much more stable now financially. We're getting better at managing our budget. Things are getting better."
 

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