DENVER — At least two Texas credit unions, Velocity Credit Union of Austin, Texas and Security Service Federal Credit Union of San Antonio, and possibly a third CU from Illinois won preliminary approval last week from a Denver bankruptcy judge to be members of a key unsecured creditors committee dealing with the Centrix Financial bankruptcy filing.
"I'm not sure what this entails since this is my first time in 35 years dealing with a bankruptcy like this but all I know is that we were selected," said Larry Strong, president/CEO of the $498 million Velocity CU.
Velocity is one of 21 large CUs listed by the beleaguered subprime lender as being owed more than $25 million in unsecured claims under Centrix' Chapter 11 bankruptcy filing.
Recommended For You
As proceedings began in earnest last week, U.S. Bankruptcy Judge Elizabeth Brown held the court's first status meeting with attorneys Oct. 9, at a session that lasted more than two-and-a-half hours.
"I was told there were more than 40 to 60 attorneys and credit union people in the hallways and in the hearing room," said Strong, whose CU was represented by Jack Jordan, vice president of lending for Velocity.
Many of the CUs on the Centrix list of "30 Largest Unsecured" claimants, which includes banks, hired Denver counsel to represent them in the proceedings.
Strong said he was not sure why his CU was chosen as a member of the main creditors committee by the U.S. Trustee, a division of the Justice Department that serves the court as a watchdog and investigative agency for the bankruptcy court. "It may be because we were the first to come out from under the risk alert" as laid down by NCUA, said Strong. NCUA clearance, he said, was given to Velocity in December, which followed the initial June 2005 risk alert warning CUs against subprime loans through a third-party. Like other CU creditors, Velocity is in the dark "on just how Centrix got those figures," said Strong suggesting the $1.7 million claim, which includes participations, is much higher.
"We were also confused about that Mission notation," said Strong referring to a joint Velocity/Mission Federal Credit Union mention of $1.4 million owed to the Austin CU. Strong said Velocity did have a Centrix participation with Mission, headquartered in San Diego.
Meanwhile, a spokesman for the $3.8 million Security Service FCU confirmed that it was also selected by the court and the U.S. Trustee for the creditors panel.
"We're pleased to be making a presentation," said the spokesman noting that the next meeting of the unsecured creditors panel is slated for Oct. 17 in Chicago.
The spokesman said joining Security Service and Velocity on the panel is Credit Union 1 of Rantoul, Ill., "plus some banks", though Credit Union 1′s spot could not be confirmed.
Lee Kutner, a Denver attorney for IFC Credit Corp., one of the chief litigants that first brought an involuntary petition against Centrix Sept. 15 before the Denver court prior to Centrix filing in Reno, said IFC is also one of the large creditors on the panel.
A spokeswoman for the Denver U.S. Trustee, Charles McVay, who has input on makeup on the creditor panel, said Judge Brown has not made "a final decision" but there were hints the creditor panel might be expanded to include as many as seven large creditors including the three CUs.
In the Oct. 9 proceedings, Judge Brown set Oct. 30 as the date for the general creditors meeting. Following that meeting she also will hear from the unsecured panel, said court officials. –[email protected]
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
