It's official. The number of Tampa Bay residents declaring bankruptcy is at an all-time high.
In the fiscal year that ended in September, 28,504 individuals and businesses sought protection from creditors in the Tampa-Fort Myers division of federal bankruptcy court.
That's a 46 percent jump from last year, and 7 percent more than in 2005, a year that saw a record number of filings nationwide as debtors rushed to court before a tough new bankruptcy law took effect.
Nor is there any sign of a slowdown as Tampa Bay's unemployment rate sits at 11.7 percent and nearly half of homeowners owe more on their mortgages than their houses are worth.
"Every month I've been expecting to see some slacking off, then at the end of the month we have this huge volume of filings that gives us another record month,'' said Michael Williamson, a Tampa bankruptcy judge.
"It's all been heading up and you wonder when it's really going to level off.''
The 14-county bankruptcy division, which stretches from Brooksville to Naples, logged big increases in all major categories: Chapter 7 no-asset bankruptcies; Chapter 13 repayment plans for debtors with steady incomes; and Chapter 11 business reorganizations.
Especially striking was the number of Chapter 11 cases, which jumped to 206 from 101 last year. Troubled businesses spanned the economic spectrum, from the ironically named Rolling in Dough Cookie Co. in Riverview to marinas to retailers to trucking companies.
And in a disturbing sign, some Chapter 11 debtors were innocent victims of the credit crunch.
"Some of these (businesses) are forced into bankruptcy not because of financial problems but because the banks, even when the loans are performing, won't renew them,'' Williamson said. Among the businesses pushed into filing because they couldn't borrow was an assisted living facility in Sun City Center.
But lenders, wary of being stuck with houses they can't sell, apparently are more willing to modify home loans than they were at the peak of the real estate boom.
"It used to be that if a debtor said they were going to surrender their property, mortgage companies said, 'Fine, sure,' " recalls Terry Smith, a court-appointed trustee who supervises Chapter 13 cases. "Now it's, 'Can we talk?' "
The Tampa-Fort Myers division includes communities like Spring Hill and Cape Coral that were especially hard-hit by the collapse of the housing frenzy. Many debtors now in bankruptcy hoped to flip properties for a quick profit but were stung when prices began to tank in 2006.
Smith said his office sees "lots of people'' surrendering two, three, even four properties because they can't afford the payments.
Though most debtors have no assets and declare bankruptcy under Chapter 7, more people with steady income are filing under Chapter 13 because it halts foreclosure and gives them three to five years to make up late payments while keeping up with current ones. Chapter 13 filings in the Tampa-Fort Myers division soared 26 percent last year, to 9,972.
Common in Chapter 13 are homeowners who borrowed against their equity but whose houses are not worth even the amount of the first mortgage. One recent example: an Oldsmar hardware salesman who has two loans totaling $279,000 even though his house is appraised at $184,500.
Because of cases like that, Tampa bankruptcy judges are doing a record number of "strip-offs'' — essentially throwing out second and third mortgages that have little or no prospect of ever being repaid.
"Legally, we've always been able to strip off seconds, but we never saw that before,'' Williamson said. "In the Tampa division we decided we didn't even need to have hearings on those anymore unless the bank asked for them.''
Along with Orlando and Jacksonville, the Tampa division makes up Florida's Middle District, the second-busiest bankruptcy district in the country. Only central California — also hit hard by the housing bust — has more filings.
Nationally, bankruptcies rose 34 percent over last year, but stopped short of the record set in 2005.
Locally, Williamson is waiting for what he calls "the other shoe to drop'' — bankruptcies of commercial real estate companies that can't pay their mortgages because tenants can't pay the rent.
"There are a lot of negotiations going between landlords and tenants and in turn between landlords and their banks,'' Williamson said. "Frankly, I wouldn't be surprised on Jan. 1 to see a new wave of Chapter 11s in the commercial real estate area.''
Susan Taylor Martin can be contacted at firstname.lastname@example.org.