A Perfect Storm of Debt
Although there are no hard numbers from the report for the years 2002-2006 there is plenty of anecdotal evidence about boomer stress in articles such as a Perfect Storm of debt puts Floridians in bankruptcy.
Mortgage woes, higher gas prices and a "perfect storm" of other financial troubles have caused personal bankruptcies to spike in Central Florida so far this year, according to the latest court records.
Nearly 1,300 personal-bankruptcy cases were filed in Orlando during the first three months of 2007, nearly twice as many as during the first quarter of last year, figures from U.S. Bankruptcy Court for the Middle District of Florida show.
And that may be just a hint of what is to come, bankruptcy lawyers say. From bankruptcy trustees and lawyers to clerks and credit counselors, everyone tied to the process is seeing more cash-strapped people coming through the door on their way to insolvency.
"Some people are just drowning in everything, whether it's debt, job loss, divorce or some health issue," George Janas, a credit counselor and managing partner of Orlando-based Consumer Debt Counselors, said Tuesday.
"They've been living so close to the edge financially -- when something big hits, it's enough to put them behind," he said. "And they can't catch up again."
Personal bankruptcies did plummet across the country after the new law took effect. In the Orlando portion of the Middle District of Florida, for example, the first-quarter caseload fell from 3,644 in 2004 and 3,300 in 2005 to just 658 last year.
But this year's first-quarter filings, while down 60 percent from 2005, to 1,298 cases, are up 97 percent from a year ago.
"There has been a perceptible increase in filings by people who are trying to prevent foreclosure," said Jonathan Alper, a bankruptcy lawyer in Lake Mary. "I don't think we've begun to see the full effect of that."
The housing boom also lured some people into buying a second home as an investment, sometimes with the aid of creative financing such as "teaser rate" or interest-only mortgages they can no longer afford, Alper said. If they qualify to file a Chapter 7 personal bankruptcy, he noted, it leads to the liquidation of their assets, including the second home, but lets them protect their primary residence.
Skyrocketing property-insurance premiums and property taxes, along with rising gas prices and that old standard, credit-card debt, are also taking their toll.
"There are a lot of things that are just out of people's control," said Anne-Marie Bowen, an Orlando lawyer and president of the Central Florida Bankruptcy Law Association. "Most people try to avoid bankruptcy at all costs, but at some point they need to realize they have to do something about their unsecured debt so they can keep a roof over their heads."
"There has been a perceptible increase in filings by people who are trying to prevent foreclosure," said Jonathan Alper, a bankruptcy lawyer in Lake Mary. "I don't think we've begun to see the full effect of that."
I suspect we have nowhere seen the full effect yet and that is going to hold back housing prices for years to come. Boomers counting on rising home prices as their retirement funding are going to be facing increasingly difficult times. The housing ATM is simply out of cash with a perfect storm of debt waiting those facing retirement.