Transcript
Ryan Stone (00:00)
Hey, I'm Ryan Stone with Bankruptcy Watch and I'm joined with Justin Plean to talk about the latest bankruptcy trends. Justin, how are doing?
Justin Plean (00:09)
Good, thanks for having me back, Ryan. Excited to talk to you.
Ryan Stone (00:13)
Cool, well I've been super excited to talk about these trends. I know that we recently released our quarter three report and there's been some really interesting numbers. We can just dive right in. As you see, bankruptcy filings are increasing a lot lately. Especially last week and more broadly over quarter three. And a lot of these increases are double digit increases.
Justin Plean (00:24)
Let's do it.
Ryan Stone (00:37)
When you look at the filings, you can break it down further and kind of look at the Chapter 7s versus the Chapter 13s. And would love to dive right into that. But before we go into that, Justin, do you have any thoughts about this? Have you kind of been seeing this on the ground? Like, what have you been seeing?
Justin Plean (00:55)
Yeah, absolutely. I mean, a couple really interesting things stick out of my mind when I see this chart. One is follow it, it has a similar pattern, right? So if you go back to 2022, you can see that the spikes are usually in the same places on a month per month basis. Now what's changed from 2022 through 2024 is how significant those spikes are, meaning how many folks are filing for Chapter 7, Chapter 11, Chapter 13 bankruptcy.
It's been consistently going up every month and then the months that usually have a historical lower bankruptcy filings continue that trend. It still dips in months like May, in June, in February, right, but it's also consistently increasing in months like March, April, September, and then it looks like November is probably gonna gonna be gonna be a similar month So it keeps going up and then again, it does look like there's an actual trend when it comes to month over month filings.
Ryan Stone (01:58)
Yeah, super interesting. And just to jump into more detail, when we were looking, when I was looking at the quarter three report and comparing quarter three of this year compared to quarter three of last year, the map was quite stark in terms of contrast. You're seeing multiple districts, like many districts with over 30% increases.
You're seeing hot spots in Texas, Florida, really all over. And you're seeing this in Chapter 13s too. Although with Chapter 13s, you're seeing a little bit more diversity with some states and some districts actually decreasing. Do you have any idea, what have you kind of seen for the difference between this increase in Chapter 7s and this decrease in Chapter 13.
Justin Plean (02:52)
Yes, so in order to qualify for a Chapter 7 you have to meet a certain income threshold and so I think what we see within the state of Florida is that there are a lot of folks here that do meet that income threshold to be able to qualify for a Chapter 7 and they're taking advantage of them. Chapter 7s are much more streamlined bankruptcy cases. They usually only last about three months until you get your bankruptcy discharge and then once you have that discharge you're no longer personally liable on the debts and you're at of bankruptcy and you can quickly start recovering faster than if you had to go into a Chapter 13 case where you may have to do a repayment plan for three or five years. So it just looks like folks are just really taking advantage of in a quick filing to their personal liability and then get out so that they can their livelihoods.
Ryan Stone (03:43)
Cool, yeah, super interesting. Yeah, and I'm glad you touched on Florida, because as you can see, the Florida numbers are crazy right now. You're seeing a 46% increase in Chapter 7 filings from quarter three of this year versus last year in the Middle district of Florida. You're seeing 43% increase in the southern district, and you're seeing a 21% increase in the northern district.
What do you see as kind of the driving trends that is pushing this up?
Justin Plean (04:20)
Yeah, that's the million dollar question, right? And I think it's a few things, and we can talk about the data a moment. But I think it's cost of living. Cost of living in Florida has continually gone up 2022. And we can look at the data on that. also that Florida is unique in that the homeowners insurance policies have continued to skyrocket over the past few years as well. And so between the cost of living increases, increase in homeowners insurance policies, coupled with the housing market nationally skyrocketing. A lot of folks that have moved here and we've had a significant population shift since 2022 coming to Florida where Florida has had almost 200,000 new residents year over year. And so I think we're seeing a lot of those different variables kind of meeting this perfect storm. And one of the consequences of that are more folks are having to file bankruptcy because they just they can't keep up.
Ryan Stone (05:20)
Yeah, super interesting. I know that we had talked about a couple, you mentioned a couple of different things. I wanna dive into I know that we had talked about a couple of different trends that you've noticed and I've got one up here right now showing some different numbers with the Middle District in Florida. Again, Middle District saw the most dramatic increase in Florida from quarter three of last year to this quarter.
What really stands out to me here is that it's really, you're seeing this massive increase and you're also seeing it kind of take the lead in a number of different areas, namely Subchapter V Chapter 11 cases, adversary proceedings, Chapter 7 cases, they are second, that's crazy to see this growth happen in the Middle district of Florida.
Justin Plean (06:11)
Yeah, so this data comes directly from the Middle District of Florida's Bankruptcy Court website. It's public information. And they've done a fantastic job with compiling this data. what's stuck out to you sticks out to me, right? Chapter 7 cases. I think what goes into that is that the Middle District of Florida is a very large district. You have Jacksonville, which is a very large city. You have Orlando. You have Tampa.
You have Fort Myers. And so it's it just spans just a really large chunk of Florida geographically, but in addition to that, it's also a heavily populated area And so I'd be curious to see kind of how the different districts populations match up against one another if I had to take a guess I would say that the Middle District of Florida is probably one of the higher populated districts in the country, and I think that's why we're seeing that they're leading in a lot of these bankruptcy categories nationally and this data was as of March 31st 2024 but I suspect that we'll continue to see these trends moving forward.
Ryan Stone (07:15)
Super interesting. Yeah, another thing that we saw released in the Southern District of Florida was the mortgage modification numbers. Do you mind just describing what I'm looking at here?
Justin Plean (07:28)
Yeah, so... I think big picture, this is just a breakdown of the three different divisions in the Southern District of Florida. And this data also comes from the Southern District of Florida Bankruptcy Courts website. And you can find this information on their website. And what they did here was they went back to 2013 on a per division basis, which is Miami, Fort Lauderdale, and West Palm Beach. And they broke down per month how many folks filed for mortgage modification mediation. I think the first thing we should talk about is what is that? What does that mean? What's mortgage modification mediation?
And what that is is a program that was developed here, actually in Florida, where a borrower or a debtor has an opportunity to enter into mediation with their mortgage servicer in an attempt to explore loss mitigation. So loss mitigation could be a loan modification. It's usually I think the first priority for what most debtors want to modify the terms of their loan. It could be a deed in lieu of foreclosure. It could be a short sale. It could be something else.
And so this gives the debtor an opportunity if they have if they're significantly behind on their monthly mortgage payments in a Chapter 13 case to meet with their with their lender cut a lot of the cut a lot of the tape out and see what they can do to explore a loss mitigation on their loan. Now the folks that are doing this folks that are in default? People that are current usually are not exploring mortgage modification mediation and so a lot of times will strategically file Chapter 13 bankruptcy just for the opportunity to go through the mortgage modification mediation program to explore a loss mitigation for their loan. So with all of that said, this chart is really interesting because tells a really important story. It tells a story about in the southern district of Florida, how frequent are folks in default and seeking mortgage modification mediation. And the people that are in default, usually they're not in default a few months. It's usually $10,000 plus. It's usually a significant amount of money, which is why they're pursuing this. So this gives a little bit of a snapshot and insight into the Southern District of Florida of how many folks are in Chapter 13 bankruptcy cases that have significant defaults on their mortgage payments. And what we're seeing is that the defaults are starting to increase come 2024 and that looks like that's what that's what the trending is and It's it's not necessarily surprising because since 2021 2022 here you've had home prices skyrocketing so if a lot of these folks are moving down here and buying and buying houses and they're buying them at much higher prices than they were you know five years ago, plus much higher interest rates, it's not surprising to see that a lot of them may have gotten in over their head and now they're trying to leverage the mortgage modification mediation program to hopefully modify the terms of their loan and get current.
Ryan Stone (10:33)
Super interesting.
Justin Plean (10:35)
Absolutely.
Ryan Stone (10:37)
Yeah, I know that one of the things that we've seen and I've had a lot of conversations about is that a lot of people are delinquent on their auto or credit loans while being up to date on their mortgage. And so to see these mortgage modifications start to increase and stuff like that shows that maybe things are starting to shift a different direction.
Justin Plean (11:03)
Yeah, and it makes sense because most of the times the last thing folks want to default on is their mortgage because that's their home, right? That's where they're usually living. That's usually their most significant asset, right? And it's usually the last from a credit standpoint that is getting defaulted on. It usually will be credit cards first and then it'll kind of a waterfall effect. It'll go to auto and then after auto it'll usually go to the mortgage.
Ryan Stone (11:37)
Yeah. I know another thing that you can't just skip over when we're talking about Florida specifically and more generally the whole country is the cost of living changes. And up here we have a list from the Florida Department of Revenue in 2024 showing the cost of living adjustments. And I think it's crazy that from 2020 to 2021 you had like a 1.2% increase.
But then from 2022 to 2023, you have an 8% increase. And over the last year, it's been a 4.1% increase. And I think it'd be tough to talk about Florida without talking about these numbers. I know I don't live in Florida, so I can't really speak to the experience of this. what have you been seeing? Have you been seeing this hit the bottom line yet?
Justin Plean (12:30)
Yeah, absolutely. mean, I live in Palm Beach County which is in southern Florida and we see it, we feel it, you feel it at the grocery store, you feel it every time you go shopping and folks have absolutely noticed it and I think these numbers going for about 16, almost a 17% increase of cost of living over the past three years is significant and people probably can't keep up with that. I mean, I don't think their incomes are increasing 17% over the last three years, right? And so it's very hard to stay ahead of this curve. And so I think this data again plays a role into why we're seeing Florida specifically have such a high jump in Chapter 7 and Chapter 13 bankruptcy filings in the Middle District of Florida and Southern District of Florida.
Ryan Stone (13:23)
No kidding, jeez. Cool, I wanna just take a step back and notice some of the trends. I know we've talked about the living costs, some of the mortgage modifications, mortgage defaults. There's a couple of factors that previous to this conversation we had talked about as things to watch, things that we're interested in, namely the population shift. I don't think you can talk about Florida and the increase in filings in Florida without talking about the number of people who are moving into Florida. And then the second part is the insurance rates. mean, when you have insurance rates increasing as much as they are, I can only imagine that the increase that combines with the cost of living increase to create kind of a interesting situation where there's a large number of new bankruptcy filings.
Justin Plean (14:16)
Yeah, so just for some context, let's say there was a home in 2016. It has a $1,600 homeowner's insurance policy, right? Eight years later that homeowners insurance policy has probably ballooned to about seven thousand dollars give or take a little bit unless you're being super aggressive with shopping in the insurance market. So I mean just just a jump there of over five thousand dollars in in seven or eight short years a lot of people just see that coming. And I think what you're gonna see is a lot of people are Letting their insurance lapse. So let's say they don't have a mortgage on their property their home is paid off. don't have to escrow their loan, so they're opting to roll the dice and not get homeowners insurance to save a few bucks. And unfortunately, when you live in Florida, it's an amazing state, but one of the cons that come with it are the hurricane season. We've already seen two pretty significant hurricanes hit the state of Florida this season. And a lot of the folks that that may have let their insurance lapse to save some money may have been significantly financially impacted and that can also play into some of numbers that we're seeing with bankruptcy filings.
Ryan Stone (15:40)
Super interesting. Yeah. One other question I had is where do you see this going specifically within Florida and maybe within the broader nation? Do you see this increase continuing to happen? What's your forecast?
Justin Plean (16:00)
Yeah, I think it is. think we're going to continue to see it happen or at least continue to rise, at least over the next couple of years. Inflation, inflation decreased the prices that we're paying for goods and for services hasn't kept up with the decrease in inflation. It's still remaining kind of stubbornly high. And so until we see those prices start to come back down to the to the medium, people are still going to continue to have financial troubles because what they paid for a year ago is now a lot more expensive than what they're currently paying for it and their income isn't keeping up with those increases. So until the income start to increase, until the price of goods and services start to decrease, we're going to continue to see increases in bankruptcy filings.
Ryan Stone (16:52)
Cool. Well, Justin, I appreciate your insights. I appreciate you joining and explaining some of these trends. And I look forward to talking again sometime.
Justin Plean (17:03)
Absolutely. Thanks again for having me, Ryan.