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Fresh Approaches to Bankruptcy and Financial Distress - Volume II: Working With Members In Financial Distress

This study is the second volume to be published from a joint colloquium around the topic of bankruptcy. 

Executive Summary

In the first volume from a colloquium on bankruptcy research we saw that a simple denial of a loan to a member can backfire as high-risk lenders in the marketplace become their source of credit. In this volume, we examine how credit unions can effectively work with members who are experiencing financial distress. Presenters for this study were Wendy Culler and Sam White of Founders Federal Credit Union (SC), and Tim Kramer of AEA Credit Union (CA).

What is this research about?

The papers in this report capture presentations made by experts in the field of bankruptcy. It also reports on the dialogue between the presenters and participants at the colloquium. The perceptions expressed at the colloquium provide continuing background for the study of bankruptcy issues, transcending the passage or failure of specific legislation directed at the problem by the U.S Congress.

What are the credit union implications?

A credit union cannot reasonably expect to change the behavior of other lenders. Therefore, the best opportunity the credit union has to head off the problem is at the time of loan denial. Encouraging the member to participate in a successful in-house financial counseling program can spare both the member and the credit union great pain later on. In this volume. White and Culler explain how these programs have been financially and philosophically successful for their credit union. In addition, Kramer presents the results of research that sheds light on ways to improve credit union collection practices when a loan does go delinquent. 

This report is sponsors by the Center for Financial Innovation, McIntire School of Commerce Foundation at the University of Virginia and the Center for Credit Union Research, the School of Business at the University of Wisconsin-Madison.