Although neither owned nor controlled by the government, a federal credit union is a “governmental unit” entitled to additional time for filing a proof of claim, according to Bankruptcy Judge Robert H. Jacobvitz of Albuquerque, N.M.
Bankruptcy Rule 3002(c)(1) and Section 502(b)(9) both provide that the bar date for a “governmental unit” is 180 days after the order for relief. In turn, “governmental unit” is defined in Section 101(27) as, among other things, a “department, agency or instrumentality of the United States.”
In the chapter 7 case before Judge Jacobvitz, the general bar date was July 19. A nonprofit federal credit union filed a proof of claim on July 22. October 8 would have been 180 days after the order for relief and the bar date for a claim by a governmental unit.
The trustee filed a final report listing the credit union as not having filed a timely claim. In his September 30 opinion, Judge Jacobvitz upheld the credit union’s objection to the final report, deciding that the credit union was a governmental until entitled to additional time for filing a proof of claim.
Judge Jacobvitz’s opinion is notable for its survey of cases giving definition to “instrumentality of the United States.” Factors to consider include whether the entity performs an important governmental function, is owned or controlled by the government, gives profits to the government, shifts its losses to the government, is exempt from state taxes or receives federal aid.
The most important factor, Judge Jacobvitz said, “is whether the entity performs an important government function.” He cited the First and Sixth Circuits for holding that credit unions are governmental entities in other respects.
The Sixth Circuit held that federal credit unions are government instrumentalities exempt from state taxation because they perform important government functions by making credit available to people of modest means. However, the Sixth Circuit declined to go so far as to hold that credit unions are governmental instrumentalities for all purposes.
The First Circuit held that a federal credit union is a governmental instrumentality with regard to the dischargeability of student loans under Section 523(a)(8).
On point, Judge Jacobvitz cited In re Trusko, 212 B.R. 819 (Bankr. D. Md. 1997), for holding that the extended claim-filing deadline applies to credit unions.
Before jumping on board with Trusko, Judge Jacobvitz said he was “not entirely convinced,” because credit unions “offer many of the same types of services as other financial institutions.” Credit unions, he said, do not need more time to file a proof of claim because information about a borrower’s account is readily available.
Nonetheless, Judge Jacobvitz believes the “better approach” would not view credit unions as governmental units for some purposes but not others. “A defined term,” he said, “generally should be used consistently throughout the Bankruptcy Code . . . [and] treated as a governmental unit for all purposes under the Code.”
Judge Jacobvitz held that the credit union was an instrumentality of the U.S. government, and therefore a governmental unit, given “the important governmental functions federal credit unions perform, combined with their extensive federal regulation, immunity from state taxation, and federal charters.”
Although neither owned nor controlled by the government, a federal credit union is a “governmental unit” entitled to additional time for filing a proof of claim, according to Bankruptcy Judge Robert H. Jacobvitz of Albuquerque, N.M.
Bankruptcy Rule 3002(c)(1) and Section 502(b)(9) both provide that the bar date for a “governmental unit” is 180 days after the order for relief. In turn, “governmental unit” is defined in Section 101(27) as, among other things, a “department, agency or instrumentality of the United States.”
In the chapter 7 case before Judge Jacobvitz, the general bar date was July 19. A nonprofit federal credit union filed a proof of claim on July 22. October 8 would have been 180 days after the order for relief and the bar date for a claim by a governmental unit.
The trustee filed a final report listing the credit union as not having filed a timely claim. In his September 30 opinion, Judge Jacobvitz upheld the credit union’s objection to the final report, deciding that the credit union was a governmental until entitled to additional time for filing a proof of claim.