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| When an Archdiocese Goes Bankrupt
By Jennifer Bjorhus
Star Tribune
January 16, 2015
http://www.startribune.com/local/288823291.html
Q: What is a Chapter 11 bankruptcy?
A : It’s a form of bankruptcy protection in which the organization does not liquidate but reorganizes while continuing to operate under the court’s supervision.
Q : Why did it file?
A : The Archdiocese of St. Paul and Minneapolis faces more than 20 lawsuits and says the total claims would likely outstrip the $5.3 million it has set aside to compensate victims.
Q : How many dioceses have filed for bankruptcy?
A : At least 11 Catholic dioceses in the United States have filed for bankruptcy since 2004.
Q : How long have they stayed in bankruptcy?
A : From one to about five years.
Q : How does an archdiocese bankruptcy differ from a business bankruptcy?
A : They are very similar. Secured creditors, such as mortgage holders on the diocese’s real estate, will be paid first. Priority creditors, such as the IRS, come next. Victims, who are unsecured creditors, are paid next and would be likely be divided into classes. The plan can treat each class differently.
Q : Will parishes or schools close?
A : No. They are incorporated separately.
Q : Does this mean victims of priest abuse won’t be compensated?
A : No. Abuse victims will likely get some compensation but no one knows how much.
Q : What does this mean for the trials that have been scheduled?
A : They will be postponed.
Q : Doesn’t the archdiocese have insurance?
A : Yes, but they are in disagreement about paying clergy abuse claims. In November the diocese filed a lawsuit against nearly two dozen insurance companies, claiming they are a key source of funds for a global settlement with clergy abuse claimants but are not cooperating and, in some cases, have refused to pay claims.
Q : How can an archdiocese file bankruptcy, but the Vatican remains immune from liability?
A : They are separate legal entities.
Sources: Star Tribune research; Professor Ralph Anzivino, Marquette University Law School
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