Central States Mortgage Co., the mortgage origination CUSO that closed its doors March 9 handing the business over to a Detroit provider, has formally filed for bankruptcy protection in a Milwaukee court.The state court filing by the 25 Wisconsin and Illinois CU owners and the Wisconsin Credit Union League sets the stage for the liquidation of the firm, accompanied by an assessment by both state and federal regulators of loan losses on the books of the investing CUs.So far, only the $190 million Prime Financial CU of Cudahy, Wis., has reported losses and write-downs in Central States; CU was placed into conservatorship by NCUA and the Wisconsin Office of Credit Unions Feb. 27.Suzanne Cowan, director of the Wisconsin Office of Credit Unions, said she did not know of any other Wisconsin CU that might suffer the same fate. "There are no other conservatorships," she told Credit Union Times.Meanwhile, the management of Central States, a CUSO founded in 1997 serving 250 Midwest CUs, was awaiting court action by a Milwaukee County Circuit judge on a voluntary petition for Chapter 128 receivership, comparable to a federal bankruptcy filing.Regarding its March 27 petition, Dean Wilson, chairman of Central States who also is the current chairman of the Wisconsin league, said the CUSO was taking the bankruptcy route "to protect customers, creditors and former employees by providing an orderly transition of our business."The Chapter 128 filing now before Judge John J. DiMotto represents a move toward "the orderly liquidation of a company and its assets under the supervision of a receiver" yet to be named, Wilson said. He added that the state court proceeding "helps ensure that everyone involved is protected and treated as fairly as possible in the process."Among major creditors of Central States are Members United Corporate FCU of Warrenville, Ill., which is owed $32.5 million on a defaulted note, along with several banks, including Amcore Financial of Rockford, Ill., and Associated Banc Corp. of Green Bay, Wis.AmeriCU said it has taken over about $10.5 million in mortgages previously held by Central States, which itself had originated $523 million in loans last year, down from $707 million in 2007, but below its 2004 high of $1.4 billion.Wilson, president/CEO of the $37 million Focus CU of Menomonee Falls, Wis., said Central States "has worked diligently in recent weeks to ensure any pending mortgage applications have been processed and completed." He added, "We are committed to helping as best as we can to resolve any outstanding issues."We have also been helped tremendously by a cooperative attitude from the Wisconsin Department of Financial Institutions and our four largest creditors all of whom have supported our move into voluntary receivership."Despite the current issues caused by the folding of Central States, Wilson said the CUSO did produce "years of very good earnings for many small Wisconsin credit unions, a fact that should not be overlooked.""And during those years we were able to provide our members very affordable mortgages," maintained Wilson, who said the members of his own suburban Milwaukee CU "benefited greatly" as did his CU.He estimated that over approximately 10 years his CU earned $700,000 "and that's not bad for a small credit union like mine."Central States' problems arose, he said, when the mortgage meltdown hit in 2007, worsening last year but nothing on the scale of the large banks.Wilson said also he appreciates the regulators' call for greater due diligence with third parties, yet "none of us have ever seen anything like what happened to the markets."The changes in the housing market "are part of a huge global shift," which has affected financial institutions everywhere, concluded Wilson.–[email protected]