Court Affirms Member Expulsion

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In an important case for credit unions, a U.S. Bankruptcy Court ruled that a credit union may expel members who cause the credit union a loss during a bankruptcy.

In its ruling, the U.S. Bankruptcy Court for the District of Maine stated that Bowdoinham FCU was within its legal rights when it revoked member privileges for two members who caused it a loss on a secured car loan.

A Chapter 13 Bankruptcy Trustee had challenged the credit union's policy revoking member privileges for anyone who caused the credit union a loss of more than $25.

The policy was adopted two weeks after the members filed for bankruptcy, owing the credit union $17,800 on a secured car loan and proposed a repayment of part of the loan. The new policy is similar to one held by thousands of credit unions.

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