New data from the U.S. Bankruptcy Courts shows a substantial increase in people in Central Florida filing for Chapter 7 and Chapter 13 personal bankruptcy. About 8 percent more individuals filed for Chapter 13 in the Middle District of Florida than did last year. Central Florida Chapter 7 filings swelled by 19 percent over last year.

Statistics released early this week showed that a total of 63,886 individuals filed for consumer bankruptcy during the 12-month period ending September 30. That number, which combines both Chapter 7 and 13 filings, is up 16 percent. The U.S. Bankruptcy Court for the Middle District of Florida covers four regions: Orlando, Jacksonville, Tampa and Ft. Myers and their surrounding areas.

Upward Personal Bankruptcy Trend Caused by Foreclosures, Unemployment

According to U.S. Bankruptcy Judge Catherine McEwen, a lot of homeowners are seeking bankruptcy protection because of foreclosures. Chapter 13 allows many homeowners to save their homes by stripping off second mortgages and home equity lines of credit, then set up a payment plan to pay off the mortgage, McEwen told the Tampa Tribune.

Also, many homeowners find they still owe money on their homes even after foreclosure. This may be because of a second mortgage or a deficiency judgment, which is when the amount the bank received from selling the house didn’t cover the entire first mortgage plus the foreclosure costs. For those who qualify, Chapter 7 bankruptcy can eliminate post-foreclosure debts such as deficiency judgments and second or additional mortgages.

Although unemployment is another reason for the increase in personal bankruptcy filings, there is some good news. The number of business bankruptcies filed under Chapter 7 or 11 in the District were up by less than one percent. McEwen said the business bankruptcy rate may be naturally leveling off after the upsurge in the past two years.

Source: The Tampa Tribune, “Personal bankruptcies surge in Central Florida,” Michael Sasso, November 9, 2010