The drawn-out financial squeeze afflicting many in the Tampa Bay area appears to be easing.
Not only have we seen a reprieve in foreclosure filings, but bankruptcy filings have also fallen significantly the past two months.
The number of Tampa cases filed in the U.S. Bankruptcy Court's Middle District of Florida fell 10 percent in December and was down 21 percent in January compared with year-earlier numbers. For the district — which also includes Jacksonville, Orlando and Fort Myers — filings fell 6.3 percent in December and 13 percent last month compared with year-earlier levels.
Paul M. "Bill" Glenn, the district's chief bankruptcy judge, said Thursday that February's numbers are on track to be slightly lower than a year ago.
That echoes a national trend. In January, there were slightly more than 90,000 bankruptcy filings, the first time in a year that monthly filings fell below 100,000.
If only the reprieve would last.
Many in the industry are bracing for a resurgence in bankruptcies this spring in tandem with more foreclosures moving through the pipeline.
"I think we still have another year or two of pain before we start to heal again," St. Petersburg bankruptcy attorney Charles Moore said, predicting the region will end the year with filings up another 5 percent.
Ed Whitson, a bankruptcy attorney at Bryant Miller Olive in Tampa, likewise thinks bankruptcies will rise 5 to 8 percent this year despite the slower start.
Both lawyers say bankruptcies have been inextricably linked to the sluggish foreclosure process as the Tampa Bay area strives to pull out of the recession.
The heavy pipeline of foreclosure filings was temporarily halted last summer after reports of faulty and fraudulent paperwork being filed by banks and their attorneys led to federal and state investigations. Some lenders voluntarily halted filings to review their processes and, even after moratoriums were lifted, cases were scrutinized more closely by bankruptcy judges, which led to more delays.
Beyond the moratorium, government-led efforts to push banks to modify more loans have had limited success. But they have bought delinquent homeowners more court time before facing a foreclosure judgment.
The result: More delinquent homeowners are staying in their houses longer without making any monthly payments, pushing off pressures on them to file bankruptcy.
"To some extent, the natural economic cycle was a little bit stunted or altered by government intervention," Whitson said.
Moore cited the case of one client who surrendered a house to his lender well over two years ago in a Chapter 7 bankruptcy and the bank has yet to file a foreclosure complaint. So he continues to live in the house payment-free. The banks are happy, he said, as long as delinquent homeowners like his client continue to keep the house and yard in decent condition.
"I'm telling clients to stay in the house, live there and keep the house up," Moore said. With the legal backlog, "it's going to be six months to three years to even get the complaint filed by the mortgage company."
Once struggling homeowners are in imminent fear of losing their houses, bankruptcies are expected to rise again.
Judge Glenn, whose Florida bankruptcy district is second busiest in the country, has heard the scenario of rising foreclosures prompting another wave of bankruptcies in the spring.
But he's hopeful that will be mitigated somewhat by a slowly improving economy statewide. "It may be that the recovery is going to keep filings this year to about the level they were last year," he said.
The best gauge of where the year is headed will come between March and May, typically the busiest season.
So far, Glenn said, the drop in filings hasn't been dramatic enough or lasted long enough to ease the district's caseload. Its eight judges and one visiting judge are juggling about 7,500 cases apiece. Their total number of cases is second only to Los Angeles, and the per-judge caseload is second only to Detroit.
Bankruptcy Judge Catherine Peek McEwen said the nine "are doing the work of what really should be 19 judges … so we wouldn't notice a slightly decreased blip on the radar screen."
Bankruptcies plummeted throughout the country after a 2005 overhaul made it tougher to file and wipe away obligations like credit card debt. Since then, however, filings have risen every year.
Jeff Harrington can be reached at email@example.com. Follow him on Twitter at twitter.com/ jeffmharrington.