With the economy tumbling, thousands of Floridians have filed bankruptcies in a last-ditch bid to keep their homes from foreclosure.
Among them was 55-year-old Rose King. In the end, she was unable to save her home, but it certainly wasn't for lack of trying.
Between 1999 and last January, King filed for Chapter 13 bankruptcy protection eight times — a move that kept lenders from forcing the sale of her St. Petersburg bungalow. And when she finally moved out in March, she took everything, including the kitchen sink.
"She lived two years for free, I can tell you that,'' says Kelly Goff, who held the most recent mortgage and had to schedule foreclosure sales four times. "I've never had anything like it, and I've had hundreds of loans. It's luck of the draw that I happened to get somebody who knew how to abuse the system and used it.''
King, who until recently made $75,000 a year breeding schnauzers, insists she did nothing wrong.
"I didn't abuse it,'' she says. "I just used what was available to me by law."
Chapter 13 can be a lifeline for homeowners who have regular incomes but are struggling with mortgage payments. Filing a Chapter 13 petition automatically stops the sale of a house in foreclosure and gives the debtor as much as five years to catch up on late payments while making current ones.
"Clearly the recent increase in filings correlates with a high number of mortgage foreclosures,'' says Judge Michael G. Williamson of the U.S. Bankruptcy Court in Tampa. "Historically, the causes of bankruptcy have been health, job loss or divorce, but now there does appear to be an additional factor that we didn't have prior to the current mortgage crisis.''
In the first three months of this year, non-business Chapter 13 filings soared to 3,151 in Florida's Middle District, which includes Tampa, Orlando and Jacksonville. That's a 42 percent jump over the same period last year and is nearing the level before Oct. 17, 2005, when a new law made it harder to declare bankruptcy.
The court can dismiss a Chapter 13 case for many reasons, including the debtor's failure to make timely payments or to comply with court orders. Technically, there is no limit on how many times a person can submit a Chapter 13 petition, but so-called "frequent filers'' like King are rare.
"The typical bankruptcy filer doesn't want to be in our court because they're embarrassed by the situation,'' Williamson says. But "there's always the potential for abuse, simply because the filing of a bankruptcy case does stop a foreclosure.''
King's first experience with foreclosure came in 1994, but that time it worked to her benefit. She had been renting the house in St. Petersburg's historic Kenwood area for years when the owner fell behind in her payments. King bought the two-bedroom house for $20,000.
In 1998, she got a $63,325 loan from Advanta National Bank, but quickly went into default. A year later, Advanta foreclosed and the house was due to be auctioned July 12, 1999. King filed her first Chapter 13 petition, automatically stopping the sale.
The court dismissed the case in early 2000 because King was late in her payments. The sale was reset for April 17; on April 12, she filed a new Chapter 13, again stopping the sale.
That case was dismissed in May 2000 and the sale was scheduled a third time, prompting Bankruptcy No. 3.
This time, the case remained active for years despite delinquent payments. U.S. Judge Thomas Baynes Jr. finally dismissed the case in 2003, and the house was scheduled for auction that Dec. 8. King filed Bankruptcy No. 4.
The delay bought her time to refinance and pay off Advanta with a $98,000 loan from Yale Mortgage. She defaulted on that loan, too, and the house was advertised for sale on Oct. 20, 2005. King filed Bankruptcy No. 5 hours before the auction was to begin.
King refinanced again, this time with a $170,000 loan from Goff, a Sarasota mortgage broker. He says he made the loan — whose 10.99 percent interest rate was lower than on her previous loans — because King reported a good income from dog breeding.
"I knew nothing about that business, so I was taken in that she had a thriving business, that she was going to expand it,'' he says. "When I look back now, I was absolutely wrong in my determination.''
After King defaulted, Goff got a final judgment of foreclosure and the house was set for sale three times, only to be stopped by Bankruptcies 6, 7 and 8.
King, 55, says she fell behind because of health problems, including heart surgery. Goff refused to work with her, she says, while she tried to get a new loan or sell another house she owned. "The only reasons I did not refinance is because property values went down,'' she says.
In January, Judge Williamson dismissed the case after Goff's lawyer argued that King was "gaming the system.'' Goff says he spent more than $20,000 in legal costs before the foreclosure auction was finally held on March 14. As typically happens when property is mortgaged for more than it's worth, he bought the house with a $100 bid. And was appalled by what he found.
The place was filthy. Everything that could be removed had been, including appliances, electrical outlets, light fixtures, even the toilet and door jambs. "It was total destruction,'' Goff says.
He has since rented the house to tenants who are fixing it up with an option to buy. As for King, she didn't fight the sale because "it was time to move on.'' And why did she leave the house in such a state?
"I don't have to answer that,'' she says. "It has nothing to do with bankruptcy.''
Susan Taylor Martin can be contacted at firstname.lastname@example.org.