Home > Pressroom > Press Release

FOR IMMEDIATE RELEASE                                                                  

Contact:   
John Kozlowski, General Counsel, or:
Becky Hart, Director of Communications
Ohio Credit Union League
800-486-2917 or 614-336-2894

Ohio Credit Union League says new bankruptcy reform bill will benefit credit union members

DUBLIN, OHIO (April 15, 2005) -- The state trade association representing nearly 400 credit unions in Ohio supports Congress' passage of a new bill that will reform the way individuals declare bankruptcy. The Ohio Credit Union League said the reforms will benefit Ohio's nearly 3 million credit union member/owners.

The U.S. House of Representatives passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (S. 256) without amendments by a 302 to 126 vote on Thursday, April 15, 2005, and President Bush has pledged to sign it into law.

The bill will help credit unions by forcing some people to file Chapter 13 bankruptcy instead of Chapter 7. People who file under Chapter 7 of the code can have their debts eliminated regardless of their ability to pay. The Credit Union National Association estimates that up to 20% of individuals who file bankruptcy each year take advantage of the system.

John Kozlowski, the Ohio Credit Union League’s General Counsel, called the bill a win for Ohio's 3 million credit union members. "Because credit unions are not-for-profit cooperatives, bankruptcy abuse by individual credit union members hurts their fellow member/owners," Kozlowski said. "We feel this legislation will help limit bankruptcy abuse while allowing members who do have legitimate claims, such as large debts from unexpected medical bills, job loss, or tragedies, to responsibly rebuild their credit."

Dan Mica, the President/CEO of the Credit Union National Association (CUNA), agreed. "Losses due to a single bankruptcy of a credit union member have a direct impact on the entire membership of that credit union," Mica said Friday. "Typically, such losses will increase loan rates and/or decrease the interest on savings accounts for all the other members of that credit union."

Credit unions are not-for-profit financial cooperatives that exist to serve their member/owners. Credit unions are governed by a volunteer board of directors and return all dividends back to their member/owners through better financial rates and improved services. Deposits in credit unions are insured up to a minimum of $100,000 by the either the National Credit Union Administration or American Share Insurance.

The main objectives of the bankruptcy reform bill includes:

(1) Reduce repeat filings;

(2) Prevent the "gaming" of the bankruptcy system, such as running up credit card bills right before filing for bankruptcy; and,

(3) Improve the administration of bankruptcy cases and provide debtors with information about alternatives to bankruptcy.

(4) Protect the right of credit union members to voluntarily reaffirm their debts

The number of bankruptcy petitions has risen to 1.5 million a year, from 348,000 only 15 years ago. Under the new legislation, people who have the means to pay their debts would file Chapter 13 and would be subject to a repayment schedule determined by the bankruptcy court.

The means test to determine repayment does not apply to people making less than the median income in their state (about $66,000 for a family of four in Ohio). So people who cannot afford to pay their living expenses and their debts would still be able to file under Chapter 7. The bill also has exemptions for special circumstances, including medical expenses, military service, divorce and other hardships. It also includes loopholes that shield assets including retirement benefits, homes owned for 40 months, and state-sponsored asset protection trusts. However, as the Wall Street Journal editorialized earlier this year, “This reform would be a small but important step toward more personal responsibility.”

Personal responsibility is critical within the cooperative structure of Ohio’s credit unions, where one member’s bankruptcy can directly affect his co-worker’s or neighbor’s finance rates.

Credit unions are proactively working to prevent their members from excessive debt by offering financial education. Individual credit unions and regional chapters of credit unions provide free financial education to their members and their communities. Members can contact their credit union or the Ohio Credit Union League at 614-336-2894 to learn about financial education opportunities.

In addition, Ohio credit unions support adding financial education requirements to school curricula.

"Credit union members who find themselves in debt trouble should contact their credit union," Kozlowski said. "There are better solutions other than declaring bankruptcy."

In surveys over the past four years, CUNA found that bankruptcy reform is supported by a majority of registered voters, credit union CEOs and credit union members.

Surveys conducted for CUNA show that bankruptcy reform is a high priority among registered voters. Survey results found that a surprisingly large proportion of the public was aware of the key problems with current bankruptcy laws: that it is too easy for people to file for bankruptcy and absolve their debts. As much as 89% of registered voters who were polled agreed that people who file bankruptcy and can afford to pay some of their debts should be required to do so.

As many as 69% of credit union members polled by CUNA agreed that laws should be strengthened to make it harder for people to file bankruptcy.

For more information about Ohio credit unions or how consumers can become credit union members, call the Ohio Credit Union League at 800-486-2917, or visit www.OhioCreditUnions.org. 

###

The Ohio Credit Union League, with offices in Dublin, is a state trade association representing more than 500 credit unions. Credit unions are not-for-profit financial institutions owned and democratically controlled by their members. Ohio credit unions provide savings, loans, and other consumer financial services to their nearly 3 million members. To learn more, visit www.OhioCreditUnions.org.