Statistical Anomaly

Statistical Anomaly

By David R. Corder

Associate Editor

By noon on a recent Friday, new filings in the Tampa and Fort Myers divisions of the U.S. Bankruptcy Court had climbed to about 110, the average daily total. When the doors closed April 29, however, the number of new filings had doubled. This is significant, considering the Middle District of Florida and its five bankruptcy divisions rank as the third busiest in the nation. Tampa is the busiest of the five.

The increase happened just eight days after President George W. Bush signed into law the first major revision to the federal Bankruptcy Act, since the mid-1980s enactment of the Chapter 12 provisions for farm families. The new congressional mandates raised immediate speculation among consumer advocates that consumer-debtors would flood the federal courthouses to beat the Oct. 17 effective date.

While the congressional action seems relevant, the reality behind this statistical anomaly in the Tampa and Fort Myers divisions actually runs contrary to that assumption. It so happened that Friday was the final day for bankruptcy lawyers to file hard-copy pleadings in the two divisions - areas that serve 14 counties from Hernando to Sarasota and from Lee to Collier.

As of May 1, all bankruptcy attorneys in the two divisions were required to file bankruptcy pleadings via e-mail as part of the federal case management-electronic case filing (CM-ECF) system. It's a practice already in place in the bankruptcy court's divisions in Jacksonville, Orlando and Viera, as well as the five U.S. District Courts in the Florida Middle District.

That's why the one-day filings doubled, says Chief Judge Paul Glenn, who oversees the Bankruptcy Court's Tampa and Fort Myers divisions, and Chuck Kilcoyne, deputy clerk in charge of the two divisions.

"The reason for (the increase) is principally the fact we're making our transition to electronic case filing," Glenn says. "The entire federal court system is making the transition from paper files to ECF. We've been making that transition for over a year. We're now at the point where we're requiring the transition to be made.

"We've done that in stages, starting in Orlando," Glenn adds. "It worked very successfully there. Then we started in Jacksonville. It worked very successfully there. Those two divisions produce about half of the cases filed in Tampa. Now we're requiring electronic filing here."

It may surprise some, Kilcoyne notes, but filings in the Tampa-Fort Myers divisions this calendar year actually are flat compared with the numbers from a year ago.

"For the calendar year, Tampa is up about only a half percent," he says.

Then April rolled in with the new electronic filing requirements and the congressional mandates on consumer-debtors. New filings jumped nearly 15% - 2,835 this April compared with 2,472 for the same month a year ago.

Despite the impact of the electronic filing requirements, Glenn acknowledges the new congressional mandates pose uncertain territory for him and the other judges in the two divisions.

"Looking into the crystal ball, there are quite a number of changes, some extensive changes in the U.S. Bankruptcy Code," he says. "There are a number of new provisions that are largely unknown."

Because of the uncertainty, Glenn says his division is preparing for at least an initial increase in filings as the Oct. 17 deadline nears.

"That's what we're getting ready for," he says. "As the summer progresses and we all gain knowledge about the revisions, and the lawyers become comfortable with the provisions, it may be there will be a short decrease in filings after the effective date. That's just speculation.

"There are some increased burdens for debtors and lawyers," he adds. "There are some potential liabilities. That could slow the filings. It could have a long-range affect on the filings. So we're all looking at it and talking about it as hard as we can to try to anticipate it."

Any impact of the new bankruptcy laws should apply exclusively to consumer-debtors, says Ed Rice, president of the Tampa Bay Bankruptcy Bar Association. It should not affect businesses that opt to reorganize under Chapter 11 of the Bankruptcy Code.

Such business bankruptcies generally are market influenced, says Rice, who focuses on business debtors at Tampa's Glenn Rasmussen Fogarty & Hooker PA. If the economy does well, he says, that generally means fewer business bankruptcies.

That appears true for the entire Florida Middle District. The Administrative Office of the U.S. Courts reports that 241 businesses filed Chapter 11 petitions for the year ended March 31, 2004, in the district, compared with 231 for the same period a year ago.

"The vast majority of the new legislation relates to consumer-debtors," Rice says. "I don't think it will precipitate any additional Chapter 11 filings. On the consumer side, it's certainly the consensus of bankruptcy lawyers there's going to be a rash of consumer filings."

Tampa bankruptcy attorney Michael Barrett says that's putting it mildly. He paints a dire picture as to the potential impact of the legislative mandates.

"The new law is going to hit hardest on the middle class who have had health problems, divorces, unemployment and things like that, people living on minimal means," says Barrett, who is certified by the American Board of Certification in consumer bankruptcy law. "It will force many of them to spend more money on credit counseling and debt education. Some of the provisions just make no sense."

For instance, Barrett says, the new law requires a two-year residency for consumer-debtors to qualify for jurisdiction under state bankruptcy laws.

"You can use Florida law if you've been here for two years," he says. "If not, then (the courts) have to completely ignore Florida law. That doesn't make any sense."

The one change that bothers Barrett the most concerns utility debts - especially amounts owed to electric companies.

"Under the new law, the utility company can disconnect for any reason whatever 30 days after the case is filed," he says. "While the debtor still can file a motion within that 30 days, the court may not consider whether the debtor has been current on the bill for years. The court may not consider that no deposit was required before the bankruptcy was filed.

"All this is just going to make it that much more expensive for them to deal with the creditors, anyway," he adds.