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GREENSBORO, N.C. – Just because it was not on the North Carolina Credit Union League’s original resource guide and directory of events and was organized in a matter of weeks didn’t stop a quickly put together training session on the new bankruptcy reform legislation from attracting a capacity crowd of credit union representatives from around the state. Seventy-five people who traveled to the League’s headquarters June 23 packed into the education center to hear League attorney Franklin Drake’s discussion on “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005″ underscored the controversy and questions the legislation has generated and credit unions’ concerns about the changes the legislation will usher in when it becomes effective October 17. NCCUL’s Lisa Brothers, AVP Education and Training said the League typically sends out a resource guide in the beginning of each year to affiliated CUs that includes a directory of planned events “so credit unions can plan out which educational sessions to attend.” But when Drake contacted her shortly after President Bush signed the legislation into law April 20 and convinced her of the importance of holding the training session, Brothers immediately sent out blast faxes to credit unions to get the word out. “Normally we like to have six to eight weeks to get a brochure together about an event to mail to credit unions. Drake suggested his idea to us about the training session the end of May right when we were in the middle of planning for our annual meeting. It was such a hot topic there was not enough advance time to put something together to get the word out. We had less than a month to plan the session,” said Brothers. Drake told Credit Union Times the “Bankruptcy Reform Act” (“BRA”) “is at least as extensive a change in the code as the code was to the full bankruptcy act in 1978. Most employees of credit unions have never known anything else.” The attorney said BRA “is a real education experience” for credit unions. In addition to the lengthy new law – 510 pages – as of June 2005 a more than 170-page technical amendments bill is pending in Congress. Provided it passes, says Drake, it too will become effective for petitions starting Oct. 17, 2005. “It was all I could do to reduce the new law to the top elements and present it in four hours,” he said. Among the top elements Drake covered were: *the period between bankruptcy discharges has been lengthened. Debtors will no longer be able to receive bankruptcy discharges as frequently as before *debtors’ new burdens of document production to qualify for bankruptcy. *new credit counseling and debtor education requirements, both to enter and to exit the system. *new limitations on the 362 automatic stay. The purpose is to discourage “serial filers”. *notices to creditors. 342(g) creates a new national registry of preferred addresses for creditors. *bankruptcy fraud suits in Chapter 7 may become easier to pursue effectively. *the “means test” is intended to restrict access to Chapter 7 “straight” bankruptcies. The theory is if a debtor has disposable income above the state median income for his size of family, his Chapter 7 petition can be challenged by anyone, including a creditor. Conversion to a Chapter 13 or outright dismissal may be necessary. *new sanctions imposed on debtors’ lawyers.. *reaffirmations will become rarer in Chapter 7. The likelihood of reaffirmation of any debt will diminish “significantly” after Oct. 17, 2005. *redemption may become “the new darling” of both Chapter 7 debtors and creditors under the BRA. *no more ride through. Debtors will have to either reaffirm, redeem, or release the collateral if they file a Chapter 7. *new cram down limitations in chapter 13 secured claims. *Pre-confirmation adequate protection payments will be required. *lien retention until 100% payment of the claim or plan completion is now required. *”say goodbye to the three-year plan, welcome five-year maximum term plans.” *new limitations on the Chapter 13 “superdischarge”. *debtors now have new ongoing Chapter 13 filing requirements during the case. *”after Oct. 17, 2005, Chapter 7 and Chapter 13 bankruptcies will become more complicated, expensive, cumbersome, difficult to manage and live under, exacting upon debtors and their lawyers, unprofitable for Trustees, and generally less lucrative as a specialty of legal practice.” Drake allowed questions and answers during the session and there were no shortage of these. He said credit unions are primarily concerned with how are they going to avoid being overwhelmed with repossession? How do they get debtors to reaffirm under Chapter 7? Is the cross-collateral clause going to survive the change? Drake opined that small single-sponsor credit unions in the state that are tied to textile plants and whose membership base is blue collar workers “will be slammed” with bankruptcy filings because so many of these businesses are pulling out of the state “and they’re leaving behind a lot of individuals who cannot pay their debts.” Drake says these credit unions “will be faced with a real problem whether to merge or expand their field-of-membership to enlarge their employer group.” For those credit unions on the east coast of North Carolina or in the western part of the state who couldn’t attend the June 23rd training session, Drake is planning to hold two more this year – one in August will be open to military credit unions on the coast and area credit unions; another will be held in Asheville in September. -

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