CUs Locked and Loaded for Bankruptcy Reform

MADISON, Wis.-The new bankruptcy law takes effect Oct. 17. Are credit unions ready? “A lot of credit unions are prepared. A lot of credit unions are almost prepared,” according to CUNA attorney Mike McLain. CUNA alone has held over 12 Webinars, audio-conferences, and e-schools, with a couple more left to go, he said. Some items in the bill, however, are holding up credit unions, and other lenders, readiness. “There is still more information to come out of the government. For example,” McLain said, “the new law has a whole new reaffirmation form.” The reaffirmation form will not be available until the beginning of October, but really, all credit unions need to do with that is print it out as needed. Credit unions will likely wait on the government though, he predicted, because writing their own form and ensuring compliance would be “somewhat costly.” Other than that, McLain said, “The law for the most part is fairly settled right now.” It is also self-implementing, he added. But, in light of Hurricane Katrina and consumer advocacy groups lobbying for a delay in the effective date, “We could see some changes because of that,” he admitted. Some of the proposals include extending the effective date for Katrina victims until October 2006 or including relief in a natural disasters bill or removing the means test for those impacted. However, McLain pointed out that “provisions in the new law would allow special circumstances to be considered.” He said CUNA feels credit unions will experience fewer losses over time because of provisions like the means test and authorizing any creditor to try to convert a Chapter 7 case to a Chapter 13. In October, CUNA will be putting out its Bankruptcy Basics book, updating its Volunteer Achievement Manual and Bankruptcy and Court Proceedings, and providing members information through its Web site and Credit Union Magazine articles.