"Most members want to pay us back, if we work with them they will see us as being on their side," said Jeff Bruce, the 70,000-member credit union's vice president of marketing.

Bruce and his counterparts at other credit unions are part problem solvers and part prevention specialists. They want to avoid, whenever possible, having their members join the growing ranks of those who file for bankruptcy.

Personal bankruptcies increased 29% during the 12-month period ending March 31, according to data compiled by the U.S. courts system. During the same period, filings involving mostly business debts grew 40%.

Immediately after Congress passed bankruptcy reform in 2005, there was a drop in the number of bankruptcies, but that has ticked back up. Last March, the courts reported a 61% drop in bankruptcies.

During the debate over the bill, which CUNA and NAFCU supported, CUNA said that bankruptcy accounted for $90 million, or 40% of all credit union losses each year.

The law tightened eligibility requirements for Chapter 7 filings, which erases most debts, pushed more consumers into filing under Chapter 13, which establishes a creditor repayment plan.

During the last year, Chapter 7 filings rose 36%, while Chapter 13 filings increased 21%.

Bruce said his credit union has seen bankruptcies increase between 10% and 15%. Several other credit unions said their bankruptcy rates were tracking the national average.

The other credit unions contacted by Credit Union Times were not considering changing the names of their collection departments, but several said they have taken steps to make dealings with that part of their organization less intimidating.

Navy Federal Credit Union, the nation's largest, is doing more to work with members before they ever have to deal with that department. They have increased advertising and other promotions for its debt-management program, a free program that employs 33 certified financial counselors who work with members of all income levels.

"People live up to their income and when that changes because of a downturn, it changes for people at all income levels," said Claudia Warszawski, manager of personal finance management for the Virginia-based credit union. "We also do a lot of re-education, so that people with strong credit scores stay that way, and those who had been strong, but slipped, regain their strength."

She added that their community outreach to businesses and schools on financial education has always been an integral part of their business practice, though there is usually increased interest during slow economic periods.

Hai Ngyen, Navy Federal's manager of specialized collections, said that once members declare bankruptcy, there is little they can do though they encourage members to reaffirm their accounts. During the 2005 debate, credit unions fought to include a provision to protect credit union members' ability to reaffirm obligations and preserve access to the credit union's financial services, rather than having to go elsewhere, where rates are generally higher.

During all of last year, 71 members of the Nassau Educators Federal Credit Union in Westbury, N.Y., filed for bankruptcy. During the first five months of this year, there have been 49 filings.

To deal with the increased financial problems of members, the credit union has increased awareness of its temporary hardship programs and its willingness to modify the terms of loans.

"When members have been in trouble, we've adjusted payment schedules, shifting payments to the end of loan," said John Beneri, the credit union's senior vice president. It has also worked with members who had adjustable mortgages from other institutions and helped them obtain fixed-rate mortgages.

Community Educators Credit Union in Rockledge, Fla., has conducted workshops at area businesses that are about to close, to help workers deal with their new financial realities.

Julie Clover, the credit union's membership development officer, recently spoke to employees at Sea Ray Boats, which closed its Merritt Island plant at the end of May, causing 750 people who built custom-made luxury boats to lose their jobs.

Clover said she found a receptive audience when she spoke about negotiating with credit card companies, when it is OK to break a lease and how to create family spending plans.

"This was all very new to them. When I asked how many people had a written budget, about half a dozen hands were raised in every session, which had about 50 people," she said.

–cmarx@cutimes.com