Spike In Bankruptcy Losses Coming To A CUNear You
WASHINGTON - (10/24/05) -- Credit unions can expect majorincreases in bankruptcy related losses for the third and fourthquarters due to the deluge of consumers who filed for bankruptcy inthe weeks leading up to the Oct. 17 effective date of the new law."It could be significant, but it's going to be short-term," saidBill Hampel, chief economist for CUNA, of the record numbers ofbankruptcy filers over the past few weeks. Data compiled byLundquist Consulting, a California firm that tracts bankruptcyfilings, indicates that as many as 500,000 Americans filed forbankruptcy in the final week before the new law tookeffect--compared to an average of 30,000 a week for last year,according to Jane Trusch, head of research at Lundquist. That meansthat bankruptcy filings by Oct. 17 will have easily exceeded lastyear's record of 1.4 million filings, she said. But Hampel said theeffects of the new law--which could push loan charge-offs for thethird and fourth quarters to 0.60%, up from 0.45%--should betemporary. He believes that many people who filed may have filedlater on but were scared into doing so by Oct.. 17 by reports ofthe potential impact of the new law. "I doubt this is going todebilitate any credit union,' Hampel told The Credit UnionJournal.