BAILOUT

THE BAILOUT IS COMING, THE BAILOUT IS COMING, and so is the cost to all of the credit unions. As everyone knows some credit unions are not exempt from the foolishness of participating in the subprime mortgage market.

As a result, it may cost all of the credit unions and even those who were not involved in the sub-prime mortgage debacle.

By now almost everyone in the world has heard about the bailout problems. Most people are now aware that financial institutions are large participants in the bailout situation.

Many now know the cost of the bailout is going to also affect credit unions. The National Credit Union Administration (NCUA) has determined that all credit unions should be assessed a charge, tax, fee or whatever you want to call it to help bailout credit unions who were involved in the sub-prime problem. If you are not familiar with this possibility you need to check with NCUA to determine what affect, if any, this will have on a particular credit union or in particular the credit union you operate or represent.

NEWS OF INTEREST

It may come as interesting news the fact that some credit unions are beginning to open leasing divisions but a wholly owned separate company. In the economic times and bailout problems, many companies from small to large are finding themselves in need of operating capital. Rather than devote funds to purchase equipment, these items are being purchased by the leasing division of a credit union then leased to the individual companies.

Max Credit Union, in Montgomery, Alabama, is an example of one of the latest credit unions opening a leasing division. For more information see the webpage of www.mymax.com.

 In the U.S. House of Representatives, HR200 is a bill introduced which may be cited as the "Helping Families Save Their Homes in Bankruptcy Act of 2009." A similar bill had been introduced in the U.S. Senate and is Senate Bill 61. This legislation is designed to amend the United States Bankruptcy Code 11 U.S.C. §109 which pertains to the valuation on the home of a debtor which is secured by a debt. All financial institutions would be well advised to keep abreast of this legislation. Additional information can be obtained from the following website http://www.opencongress.org/bill/111-h200/text.

A legal case of significance to all financial institutions was decided by the United States Court of Appeals for the Eleventh Circuit. In the case of Daimler Chrysler Services v. Rollifee Franklin Barrett, Jr., Mary Ann Barrett 543 F.3d 1239, (11^th Cir. 2008), the question before the court was: "Whether...a Chapter 13 debtors surrender of a "910 vehicle" (i.e., a vehicle purchases for personal use within 910 days before filing for bankruptcy) fully satisfies a creditors claim secured by the motor vehicle and prevents the creditor from filing an unsecured claim for any deficiency balance.

Apparently, a number of the Circuits have considered the question and have answered no, the creditor cannot file for a deficiency.

However, the Eleventh Circuit Court of Appeals decided its opinion in line with the Fourth, Seventh, Eighth, and Tenth Circuits in holding the creditor could pursue an unsecured deficience balance. The court held

"The deficiency claim is to be governed by th parties contract and applicable state law, and will depend on whether the contract and state law provides for recourse. In the Bankruptcy code says otherwise, and we see no persuasive reason to conclude otherwise."

This is the type of split in the Circuit Court opinions which oftentimes results in the Supreme Court of the United States granting review in order to decide the issue and settle it once and for all among the Circuit Courts.

Each financial institution should take steps to determine what circuit controls their state and you will have an idea for the tine being whether you will be permitted to file for a deficiency if the creditor surrenders a "910 vehicle" in payment of his debt in Chapter 13.

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