Diocesan Chapter 11 bankruptcies are a contemporary reality that has been forced on an ever-increasing number of U.S. dioceses, as a direct consequence of the huge cost of settling historical claims of clergy sexual abuse.
But as a spate of recent news articles has highlighted, these bankruptcy procedures are never smooth processes — and they don’t guarantee an end to the legal problems generated by the Church’s earlier failures to address the scourge of sexual abuse adequately.
RELATED: U.S. Dioceses Declaring Bankruptcy
According to the Catholic Project, which utilizes data compiled by University of Pennsylvania law professor Marie Reilly, a total of 39 dioceses have filed for bankruptcy since the Archdiocese of Portland initiated the first diocesan Chapter 11 proceeding in 2004. Of these, 18 dioceses currently remain in bankruptcy, with the most recent filing taking place on Oct. 31 in the Diocese of Alexandria in Louisiana, while the other 21 have emerged from the process.
Unlike the liquidations employed in most bankruptcy filings, Chapter 11 bankruptcy exists to allow entities to try to survive by reorganizing and securing debt settlements with various groups of creditors — primarily with sexual assault claimants, in the case of diocesan bankruptcy filings. Indeed, diocesan Chapter 11 bankruptcies have always been focused on negotiations with lawyers for the sexual-abuse claimants, and reaching a mutually acceptable agreement is the centerpiece of the legal process.
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