Haven't heard of Chapter 2 bankruptcy? Bet you skipped on over to Chapters 7 and 13 which have all the "steamy stuff," didn't ya? Well, the newly, reintroduced Bankruptcy Reform Act is much like one of those wicked romance novels-there sure are some saucy parts that will definitely make those old toes "curl"!! Might want to back up and read "the whole book" from cover to cover, if you want to better understand "the plot."
Now that the 2003 version of the Bankruptcy Bill has been regurgitated without revision, it's pretty obvious that the credit union trade associations have chosen, once again, to disregard the facts and to favor, instead, their spin doctors and opinion pollmeisters-which often passes for thinking "inside the wasteline." (Um, maybe that should be waistline, or is it beltway?) Anyway, here are 10 questions that I suspect you'd like to understand before you cast your credit union pearl before this hoggish Bankruptcy Abuse Reform Fiasco ("BARF" for short). Remember how surprised you were with "the subsequent revelations" (and major disastrous problems) which arose from HR 1151? Well, as old Ron used to say: "Here they go again!"
Were you aware that BARF included these credit union "political victories"?
Ten Questions You Should Ask
About Bankruptcy Reform
1) The new bankruptcy bill encourages the use of Chapter 13 bankruptcy in lieu of Chapter 7.
Currently, two-thirds of Chapter 13 filers do not finish these bankruptcy repayment plans. There is no apparent reason to feel the new law will improve the ratio.
In Chapter 13 filings under current bankruptcy law, unsecured creditors are rarely repaid. There is no reason to anticipate that credit union losses will improve.
Has your trade association given you an honest estimate of how much you'll "save" in loan losses? If not, why not?
2) Do credit unions truly wish to agree to mandatory debt-management plan (DMP) participation (with resultant rate reductions) dictated by consumer counseling groups? Did you know the new bankruptcy bill "encourages" this?
3) Do credit unions really think members will benefit by giving manufactured home financing companies a higher priority in bankruptcy? The new bankruptcy bill enhances mobile home dealers standing in comparison to credit unions. Do you really want this?
4) Do credit unions truly believe members will benefit by giving "used car salesmen" greater protection and priority under the new bankruptcy act? Used car dealers (your "Fast Eddie type") gain an advantage over credit unions in the new bankruptcy bill. You endorse this- right?
5) Do credit unions really feel that credit card companies should have a greater ability to collect from college students who were given numerous cards in college when the students had no income?
Credit card companies gain financial advantage over credit unions in the new bankruptcy bill. We're spending our political capital to promote this?
6) Do credit unions endorse all lending practices by all creditors? Is there any differentiation that should be made based on rate, terms, lending practices, fees, due diligence, ethics? The bankruptcy bill gives equal standing to all unsecured lenders regardless of their lending ethics. The ethical, "white hat" lenders get trashed under the new bill. You agree this is fair?
7) Do credit unions really support permitting the affluent to keep their "multi-million-dollar mansions" (if they've owned the house for 40 months)? Despite what you've heard, the bill penalizes the poor. Your credit union endorses letting the wealthy keep the estate while sending the poor to the wall?
8) Why do credit unions support eliminating "judicial discretion" in the bankruptcy process? Does "no mercy," no individual variance truly reflect real life? Are all individual cases of bankruptcy exactly the same? Is all bankruptcy unjustified and abusive? Do you really want a legal system that can't use judgment?
9) For bankruptcy repayment standards, do credit unions really support letting the IRS fix the "living standard" criteria for all members? Does "one size fits all" really make sense in evaluating the financial needs of individuals? All members have the same basic financial needs, right?
10) Many credit unions have moved to risk-based pricing on loans. In theory, risk-based lenders take greater credit risk and should expect greater credit losses. Credit union risk-based lenders charge higher rates to compensate (actually to gouge!) for the extra risk. So quit whining! You've already been "paid" for those bankruptcy losses! Or is risk-based lending a little less scientific than claimed? Are credit union managers pointing the finger at "bankruptcy abuse" to avoid acknowledging their poor lending practices?
*BONUS QUESTION*
Which group of credit union members, volunteers and professional staff has thoroughly reviewed the provisions of this bankruptcy bill? Who were they? When did they meet? As democratic cooperatives, how did the vote come out?
You ought to get a wee bit nervous if those trade folks won't give you some straight answers to these questions. Why don't you give 'em a call and ask....
Finally, about this Bankruptcy Bill (BARF), just remember what my Mama used to say about siding up with unseemly associates: "You should never wrestle with a pig. You'll both get dirty and the pig likes it!"
Jim Blaine is CEO of State Employees Credit Union, Raleigh, N.C. Mr. Blaine can be reached at P.O. Box 27665, Raleigh, NC, 27611.
