Bankruptcy filings fall in South Florida

August 1, 2012|By Marcia Heroux Pounds, Sun Sentinel

Fewer South Florida residents filed for bankruptcy in July, the fourth straight month of declining bankruptcies and an 18 percent drop from a year ago.

There were 2,173 filings in the tri-county area compared with 2,654 in July 2011, the U.S. Bankruptcy Court in Miami said Wednesday.

Lawyers say struggling homeowners are putting off bankruptcy in hopes of saving their home through a loan modification or getting rid of it through a short sale.

Bankruptcy filings for July decreased 3.5 percent from June, when 2,252 consumers filed bankruptcy.

Fort Lauderdale bankruptcy lawyer George Castrataro said bankruptcies may be slowing because struggling homeowners are waiting for a possible short sale - unloading the homes for less than the mortgage amount. Others who haven't been able to reduce their mortgage rates are looking to the prospect of mediation to get their loans modified, he said.

Bankruptcy filings tend to follow foreclosures, which were in a bottleneck as major lenders reviewed possible paperwork errors. But there could be a new wave of foreclosures as lenders finally take action against homeowners in default, he said.

That's prompting local judges to take a closer look at mediation. If South Florida judges agree on a resolution, mediation could be an option for homeowners by year-end, he said.

Brian Cohen, a bankruptcy lawyer in Palm Beach County, said more clients are being approved for loan modifications and canceling their bankruptcy plans.

"That's rescuing a lot of people. They'll contact us and say we're not going to go through with this anymore because the bank approved us," he said.

Cohen also said more debtors seem to be tightening their belts, reducing credit card and other debt to avoid bankruptcy.

In July, bankruptcies ticked up in Palm Beach County with 371 filings compared to 331 in June. But filings fell in Broward and Miami-Dade counties to 655 and 1,147, respectively.

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