Bank Employee Files Bankruptcy
ILBanker
10 Posts
I am hoping that this group will be able to give some advice on this situation. We have a bank manager who is experiencing extreme financial strain. We have several loans outstanding to this manager. New loan requests are being made by the manager, but they are being denied as we are now aware of the financial situation. We feel that bankruptcy is likely in this case. We are required by the FDIC to monitor employee accounts. We have seen in the past that employees who are under financial strain go to extreme measures to try to cover up problems, so employee finances are always a concern. This manager has been an above average performer, but there has recently been some questionable activity in her checking accounts that I believe will only escalate. We stand to have a significant loan loss if the employee files bankruptcy. The question has been raised, can we fire an employee who files bankruptcy or simply does not pay back the debt. I don't know the answer to that question. I am hoping that you can give me some guidance.
Thanks for your help!
Birgit
Thanks for your help!
Birgit
Comments
Bankruptcy regulations phobit employers from retaliating against employees who file for protection under the bankruptcy laws.
One of the options those in bankruptcy have is to reaffirm debts that would otherwise be dischargeable...this does require approval of the court....
I would suggest talking with your attorney to see what options you may have to adjust the loans to make her unable to discharge them in the bankruptcy or require that she repay them as a contingency of her continued employment.
Although, if you think she is taking money from your institution, that is something all together differend. I'm not sure if that's what you were suggesting in your post as "questionable activity"
The questionable activity I spoke of is not physically taking money. It is what banks call "kiting," which involves depositing a check from another bank into an account at your bank and vice versa. The individual can take advantage of the float time between banks to make use of money that does not really exist at either bank. It is not clear yet whether this is the situation or not. Time will tell.
Thanks for your input!
Now may also be the time to perhaps think about changing your internal policies to prohibit loans and other enhanced banking services to employee-customers. I think it would be much better to simply allow them basic checking/savings/MMA, etc, without any lending activity. Just my opinion.
Gene
As to the loans, if they have servicing requirements, is she making the required payments? If so, she is meeting the obligations, if not, then pursue whatever remedies are outlined in the loan documents - a bit like you would any borrower that is delinquent.
As to monitoring individual accounts, as required by the FDIC, I would follow those rules to the letter. I would be surprised if they did not have some fairly specific guidelines set out for you to follow. If Kiting is indeed happening, isn't that illegal? If you have real evidence, then use it. Talk to the EE, or talk to your counsel or both - perhaps even the gendarmes when the time is right.
Do these things now rather than waiting for her to play the bankruptcy card. Proactive is better than reactive in my book.
Kiting is a very serious offense -- or at least it was when I worked for a credit union. Our written policy stated that an employee would be terminated for kiting. And we did. So investigate and take appropriate action.
If the employee is changing records to hid their financial problems address that. Deal with the present issues not with something that may not happen.