The first time since 1993, a slowing economy and growing consumer debt have increased credit union holdings of loans tied up in bankruptcy proceedings.

Industry observers don't expect this trend to slow down.

Outstanding credit union loans to people who have filed for bankruptcy protection stood at $420 million as of last June, up 21.7% from a year earlier, according to call-report data culled by the Credit Union National Association. The ratio of loans in this category to total loans was 0.22%.

In last year's first half, 75,031 credit union debtors filed for bankruptcy protection, 17.2% more than a year earlier, according to the data.

The problem mirrors a national trend, according to figures from the Creditors Bankruptcy Service, a Dallas-based newsletter. There were 417,534 new bankruptcy cases filed in the first half of 1995, up 6.5% from the year-earlier period.

"The economy was not doing as well as it had been," said Keith Peterson, an economist for CUNA, which is based in Madison, Wis. "And there are some pretty clear signs that people are taking on a lot of debt and some are getting in over their heads."

Wayne Winegarden, an economist for the rival National Association of Federal Credit Unions, said that maturing loan portfolios also played into the increase, and that 1996 will bring more of the same.

"The trend seems to be rising," he said, "but I don't expect ... levels that are very high."

Indeed, the numbers are shy of June 1992, when the outstanding balance of credit union loans in the bankruptcy category hit $446 million. But that's all looking at the big picture: On the ground, credit union executives are tearing out their hair over what they see are an increasing number of irresponsible consumers and the credit card issuers that cater to them.

"The economy certainly has a lot to do with it, but I think that lawyers advertising the fact that bankruptcy is something you should take advantage of doesn't help," said Brian McDonnell, executive vice president of Navy Federal Credit Union, Vienna, Va.

Eldon Arnold, senior vice president of $1.4 billion-asset Citizens Equity Federal Credit Union in Peoria, Ill., said it was seeing loan losses shift from abandoned debts to bankruptcies. "We're seeing that principally in the unsecured credit area," he added, "and I think that's because of the flood of credit cards out there."

A grueling strike at Caterpillar Inc. that ended only recently also played a role in growing bankruptcy in his area, Mr. Arnold said.

Citizens Equity's outstanding loans in the bankruptcy category totaled $3.6 million last June 30, up 80% from the a year earlier, according to figures from Sheshunoff Information Services.

It isn't just the money that makes bankruptcies frustrating for credit unions, industry observers and officials said - it's also the unpredictability of bankruptcy filings.

"We can't protect ourselves," said Perry M. Dawson, chief executive of Suncoast Schools Employees Federal Credit Union, Tampa, Fla. "They're people who we would generally lend to ... but they're people who are trying to find the easy way out."

Suncoast's bankruptcy balance was $2.1 million last June 30, up 62% from a year earlier, according to Sheshunoff.

"It's an increasingly bigger problem," he said. "We're seeing a larger portion of our members filing bankruptcy. ... It's increasing our cost of doing business."

To cut losses, the credit union has been doing less debt-consolidation lending than in the past, Mr. Dawson said.

"With auto repossessions we usually lose something, but with these darn bankruptcies ... it's just gone!" he said.

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