Florida Bankruptcies Remain High as Foreclosure Challenges Continue

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After a record number of bankruptcy filings in 2010, the numbers were down somewhat for the first three months of 2011 in the Middle District of Florida. The Middle District includes 35 of Florida’s 67 counties, including Jacksonville, Tampa, and Orlando. While the number of filings was reduced by almost 16 percent, the total number of bankruptcies filed was still high, at 13,596.

Bankruptcy as an Alternative to Foreclosure

One reason for the drop in the number of bankruptcy filings could be due to the “robo-signer” scandal last fall. U.S. banks were found to have used low-level employees, referred to as robo-signers, to rubber-stamp thousands of mortgage documents for foreclosures without first checking the accuracy of the documents. In one case, a Florida attorney who worked a second job as a foreclosure processor signed off on 150,000 mortgages in three years. This means she would have had to review and approve more than 130 mortgages per day in her spare time.

In another case, former Tampa teacher Tom Wood paid his condo mortgage without fail. When his bank went under, his loan ended up at Bank of America, with some of the records missing. Wood didn’t even know there was a problem until he was served with a notice of foreclosure. When he tried to resolve the issue, his loan wasn’t in the bank’s computer. His attorney looked into the case and discovered the foreclosure was approved by a robo-signer.

With the discovery of the robo-signer scandal, foreclosures were temporarily halted in 23 states, which may account for the slowing of bankruptcy filings. This is because one main reason people seek relief through bankruptcy is to prevent foreclosure. Banks involved include Wells Fargo, GMAC, One West Bank, and JP Morgan.

Moving Forward

The robo-signer story is still unfolding. But the respite from foreclosure that if offered for some people may not continue indefinitely.

The fact is that bankruptcy is often a better solution than foreclosure. It’s true that both remain on your credit for seven years. But a foreclosure can actually have a bigger negative impact on your future ability to obtain credit.

Additionally, some types of bankruptcy will allow you to keep your home, depending upon factors such as its value and the amount of equity you have in it. This makes bankruptcy a much more attractive option than waiting for your house to be taken away by the bank. If you are unable to keep up with your bills, bankruptcy may be a viable solution that allows you to pull yourself out from underneath crushing debt, but also allows you to continue living in your cherished home.

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