Credit Unions are responsible to their membership and as such can be very agressive. More than likely they will sue you. They can also cross collaterize accounts, meaning they can take whatever is in any bank account you have with them.

so it's going to be really tough to settle with them here? Is there any hope?

I received a formal letter today (57 days past due).

" Loan is now in default. This letter is sent as a courtesy to notify you of our intent to file legal action, unless payment is received by 05/15/2012. This serious step is taken reluctantly. However, our primary concern must be to protect our member's savings, which were loaned to you. A legal action could result in a court-ordered judgement against you. This becomes a part of your credit record, where it can remain for up to seven years. Please be aware that JFCU may provide information to credit bureaus about an insolvency, delinquency, late payment, or default on your account to include in your credit report."

Questions:
1. If legal action is filed, what is my next step?
2. Who should I contact for legal guidance here?
3. If the credit union goes to court, what are the chances that I can get the debt lowered or bring other debtors into that action?
4. Could I even go to court without filing for bankruptcy? (I think no, and I can't file bankruptcy because of my job).

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Pay the debt off or settle it. It would be next to impossible to dispute the debt.
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Really not a lot an attorney can do for you.

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It will be up to the CU if they wish to settle. However do you have a lump sum to settle the debt with? They will not lower it and give you payments. Keep in mind YOU pay the cost of the court action (court and legal costs) plus interest on the judgment.
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I dont understand this question

If your paychecks are direct deposit to that credit union, open another account somehwere else immediately. Under most credit union member agreements, they have the right to take that money to satisfy defaulted debt.

Also, if you have any secured debt with them they automatically secure this debt to that collateral. For instance, if you have a car loan with them, they can then repo the car as the collateral for the defaulted loan. They can also attach the debt to your house but it's unlikely they would foreclose to collect but you would have to pay if off in order to sell the home or refinance in the future.

The loan is an unsecured personal loan. I moved all of my direct deposits to another bank long ago.

Since I have no assets, what could a potential ruling be against me if they take me to court? Wage garnishment?

Does a court case affect my credit negatively?

Wage garnishment and bank account levies. They can easily find your other account.