Handling the bankrupt member who has caused you a loss

One of the first things I learned in credit union land was that you can deny services to a member who has caused you a loss. Specifically, all a member is ultimately entitled to is a share draft account and a vote at the annual meeting.

One of the first things I learned in bankruptcy law land was that you can’t seek to collect funds against a member who has filed for bankruptcy.

Let’s face it, these two bedrock principles are in conflict. What does a credit union have to tell that member she has to pay back her discharge debts before she becomes eligible for full-fledged membership benefits? This is precisely the question that a bankruptcy court in New York answered in a decision released this past week. It’s worth it for you to keep this one in your file: It’s the first 2nd Circuit case that I have seen dealing with this precise issue and it provides a good template against which to make sure your own policies are being implemented properly.

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