How Do Credit Unions Deal with Bankruptcy Differently from Banks?

 Posted on December 03,2020 in Bankruptcy

Bankruptcy is a complex process for any financial institution, but for credit unions, in particular, there are some special issues to take into consideration when proceeding with your debt collection efforts. Unlike many banks, auto lenders, truck lenders, equipment lenders, or other financial institutions, credit unions face additional challenges in their recovery efforts due to the nature of their organizations. Here are some tips for how to manage member bankruptcies or other debt collection needs if you work for a credit union.

3 Keys to Successful Credit Union Debt Collection

While there are many ways you can pursue debt collection successfully, recouping as much of the lost funds as possible, that are similar to banks and other related institutions, there are certain approaches that credit unions should keep in mind when pursuing collection efforts against one of their members, such as the following:

1. Protect your credit union’s reputation. As you know, the credit union relationship with those who use the union’s services is unique in the financial industry. People who use credit union services are not just customers; they are members of the union and even part owners. These dynamic organizations are not-for-profit and focused solely on the financial well-being of their members. They are cooperative in that one member’s savings could become another member’s loan. Such community-building efforts are central to a credit union’s success. A credit union’s reputation is vital in that sense. If one of the credit union’s members is facing difficult financial times, such as a bankruptcy, the way the credit union handles such adversity will not only influence a prospective member’s perception of the union but also the current members’ opinions. If any of the members realize that the credit union is acting predatory or otherwise unbecoming of a respectable, community-driven not-for-profit, then membership will naturally decrease. In that sense, you must do all you can to help the member before bankruptcy even becomes an option. Also, be proactive with your members in keeping them on the right financial path. However, if bankruptcy eventually becomes necessary, be professional and courteous in abiding by the rules set forth in bankruptcies, including the automatic stay.

2. Be wary of outsourcing debt collection to outside organizations. In much the same way that you must protect your credit union’s reputation during bankruptcy, you must do the same when tasked with collecting debts. If you do not trust the organization you are considering to outsource that task to, then do it yourself. If you do not have the resources to do so, then carefully vet the company you plan on outsourcing debt collection to. This company must fully understand your mission and vision; they must not make your credit union seem any less personable, professional, and compassionate to members who are delinquent in owing money than your credit union is to members who do not owe any money.

3. Hire a debt collection attorney who understands the importance of your relationships with your credit union members. Just as any companies you work with must be aware of—and in compliance with—your mission as a credit union, so must the lawyer you hire to assist with debt collection or bankruptcies. An attorney who has been working with credit unions for years understands how delicate the balance is between treating your members with respect and professionalism while also somehow maximizing your debt collection efforts.

Contact a Chicago Credit Union Collection Lawyer

In terms of debt collection and bankruptcy, credit unions should consider consulting with a reputable Illinois credit union bankruptcy attorney who has plenty of experience dealing with credit union members. The knowledgeable legal team at Dimand Walinski Law Offices, P.C., knows how to handle such cases with finesse and skill. Call us today at 312-704-0771 to schedule a private consultation.

Sources:
https://www.mycreditunion.gov/about-credit-unions/credit-union-different-than-a-bank
https://www.cutimes.com/2018/05/18/your-member-has-filed-bankruptcy-now-what/
https://www.thebalance.com/bank-vs-credit-union-315399