ARLINGTON, Va.-Bankruptcy reform is still very much at or near the top of most credit unions' crucial issues. Nearly 72% of the credit union respondents said bankruptcy reform was very important to their institutions, NAFCU's February Flash Report found, and 18% stated it was an important issue. In particular, 49% of credit unions said the mandatory Chapter 13 consideration was most important to them, while 20% wanted to eliminate `cramdowns,' where debts are determined based on an object's-like a car's-value rather than the amount remaining on a loan. Respondents also frequently cited mandatory financial education (8%), clarifying the right of reaffirmation (8%), revising automatic stay provisions (5%), and extending the period between bankruptcy filings (3%). NAFCU's Flash survey also delved into bankruptcy-related issues and trends. Half of credit unions responding to the survey, which is typically around 100, said that bankruptcies increased at their institutions in 2004. Another 19% reported that the number of bankruptcies was about the same as the 2003 level. On average, the credit unions told NAFCU that about 40% of their charge-offs were due to bankruptcy last year. However, the Flash found several credit unions that said nearly all of their charge-offs were due to bankruptcy filings. Credit unions use various methods to determine likely bankrupts. Forty-two percent said they use a specific credit scoring methodology. Another 25% responded that they attend creditor meetings, while another 42% occasionally attend. Just 6% said they always challenge members' reported expenses and another 25% said they occasionally raise objections. Once a member has filed, nearly 45% answered that they always screen members past 60-days of purchases for excesses. Another quarter indicated they occasionally screen. Most credit unions (84%) said the bulk of their bankruptcies were from members below the average member age. -

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