In an earlier post in June, we mentioned that bankruptcy filings were down in the U.S. Bankruptcy Court Middle District of Florida. Between January and June of this year, filings are down 17.2 percent which translates into 5,877 fewer, compared to the same time frame in 2010. If the trend continues throughout the remainder of the year, the Middle District could end 2011 with nearly 10,000 fewer bankruptcy filings than last year.
A major factor in the drop appears to be the foreclosure paperwork scandal that wracked the nation, where signatures of bank employees were provided on foreclosure documents without checking the veracity of the information contained therein. The scandal ultimately curtailed foreclosures which are often intimately tied to bankruptcy filings, since filing for Chapter 7 or Chapter 13 bankruptcy stops all foreclosure proceedings.
While most don’t expect the numbers to rise to the record rate posted last year, few think the trend is here to stay. There are several reasons for this in addition to the expected rise in foreclosures. First, the weaker-than-expected job market with the national unemployment rate marking only a small change in the report released this past month. Also contributing is Florida’s prolonged economic recovery. According to economists, though the national recession ended in 2009, it did not end in Florida until 2010.
Because the economy cannot turn around overnight, it is expected that some Florida residents will continue to face the financial hardships they have been experiencing the past few years. Accordingly, the bankruptcy filings will likely trend upward as banks determine how to once again proceed with foreclosures in the shadow of the paperwork scandal.
Financial News and Daily Record, “Bankruptcy rate down 15% at midyear,” Karen Brune Mathis, July 14, 2011