One N.J. Catholic diocese has filed for bankruptcy. Will the other 4 follow?

By Kelly Heyboer
Star-Ledger / NJ.com
October 20, 2020

https://www.nj.com/news/2020/10/one-nj-catholic-diocese-has-filed-for-bankruptcy-will-the-other-4-follow.html

The debt began overwhelming the Diocese of Camden late last year.

Faced with a flood of priest abuse victims applying to the New Jersey Independent Victims Compensation Program, the Catholic diocese had to borrow $8 million to pay out-of-court settlements.

Then, the diocese was slammed with another 55 lawsuits from other alleged abuse victims in state court after New Jersey changed its state law Dec. 1 to allow victims to sue the Catholic Church.

But the final blow came when the coronavirus pandemic hit last March and the Diocese of Camden’s 62 parishes were forced to shut their doors for months. Without regular Masses for the diocese’s 486,000 Catholics in South Jersey, weekly collections nearly disappeared and other donations dwindled even as churches slowly reopened.

On Oct. 1, the Diocese of Camden announced the inevitable: It had filed for bankruptcy.

“I take some comfort that we are not alone in making this decision, as we have seen that well-known public entities and other Catholic dioceses across the country have been forced recently to do likewise,” Camden Bishop Dennis Sullivan said in a letter to parishioners.

Though Camden is the first diocese in New Jersey to declare bankruptcy, more than 20 Catholic dioceses around the country have taken the same path after priest sexual abuse settlements began to drain their coffers. That includes the Diocese of Rockville Centre on Long Island, one of the largest dioceses in the country, which announced its bankruptcy filing on the same day as Camden.

Like the Diocese of Camden, Rockville Centre cited the twin financial burdens of the pandemic and sexual abuse lawsuits and settlements as the heart of its financial problems.

Two area Catholic dioceses filing bankruptcy on the same day raised questions about whether other dioceses will follow.

New Jersey’s other four dioceses — the Archdiocese of Newark and the dioceses of Metuchen, Paterson and Trenton — are all facing the same financial problems brought on by the pandemic, clergy sexual abuse lawsuits and settlements reached through the New Jersey Independent Victims Compensation Fund.

When asked by NJ Advance Media whether they are considering bankruptcy, none of the four New Jersey dioceses answered directly. All said they are doing their best to address the financial challenges.

“The Diocese of Paterson is coping the best it can with the resources it has at hand during the pandemic," said Richard Sokerka, a spokesman for the diocese with more than 100 parishes in Passaic, Morris and Sussex counties.

The Archdiocese of Newark, the state’s largest Catholic dioceses, said it is facing “economic turmoil,” like all faith-based institutions around the country.

“Since the onset of the pandemic, the archdiocese has taken steps to safeguard its ministries and programs, to ensure the continued delivery of vital community services and to ensure that operations remain efficient. The archdiocese will continue to monitor the evolving situation and adapt as needed,” said Maria Margiotta, an Archdiocese of Newark spokeswoman.

None of New Jersey’s Catholic dioceses have revealed how much they’ve lost in donations since the pandemic began. With more than a third of residents identifying as Catholic, New Jersey has one of the highest percentages of Catholics in the nation, trailing only Rhode Island.

All five of New Jersey’s dioceses lost enough money to apply last spring for taxpayer-funded loans through a federal program designed to help keep small businesses afloat during the pandemic.

None of the dioceses revealed how much in forgivable loans they received through the federal Paycheck Protection Program to help pay employees in their parishes, schools and administrative offices. But all said they needed the help.

The pandemic has also taken a toll on Catholic schools, which are usually partly funded by the dioceses. New Jersey’s dioceses announced over the summer that more than 20 Catholic schools statewide would either close or merge for financial reasons.

Despite the mounting financial problems, the Archdiocese of Newark and the dioceses of Metuchen, Paterson and Trenton said they are continuing to pay settlements made through the New Jersey Independent Victims Compensation Fund. The independently-run program was created and funded by New Jersey’s five dioceses last year to offer private financial settlements to abuse victims as an alternative to filing more costly and public lawsuits.

The Diocese of Camden has promised parishioners in Atlantic, Camden, Cape May, Cumberland, Gloucester and Salem counties that its bankruptcy filing will not have a major impact on its parishes. Masses will continue. There are no current plans for layoffs. The diocese’s Catholic elementary and high schools, which operate as separate financial entities, will not be directly affected.

But the bankruptcy filing could limit how much more than 200 debtors, including clergy abuse victims waiting to collect financial settlements, will get from the Diocese of Camden.

Since the New Jersey Independent Victims Compensation Fund began last year, 184 alleged victims have filed claims involving the Diocese of Camden alleging abuse by clergy. Of those claims, 104 were decided and the diocese has paid $8.1 million to 71 victims, said Camille Biros, co-administrator of the fund. But another 80 claims against the Diocese of Camden that were still in the review process were left in limbo.

“The program has been shut down as a result of the Chapter 11 filing,” Biros said.

Although there is one Independent Victims Compensation Fund for the five dioceses, if a claim is found to be legitimate the money for the settlement usually comes out of the diocese where the priest served.

Victims can still file lawsuits against the Diocese of Camden, though any settlements will be delayed while the bankruptcy moves through the courts. There are more than 50 names and initials of people who have court cases against the diocese listed in the bankruptcy filings.

“The bankruptcy does not mean abuse survivors will receive no compensation for the abuse they suffered. The bankruptcy simply pauses the pending lawsuits against the diocese so that a bankruptcy judge can marshal its assets and insurance and then decide a fair way to compensate abuse survivors from those assets," said Michael Pfau, an attorney who has represented sexual abuse victims in New Jersey and around the country.

New Jersey’s Catholic dioceses have long said they don’t rely on weekly collection plate donations to pay sexual abuse settlements. Instead, they have used insurance plans, self-insurance funds, the sale of property and loans to cover costs related to abuse claims.

However, the Diocese of Camden’s bankruptcy filing revealed it has no insurance plan to cover sexual abuse claims related to allegations that took place before 1969. Until the bankruptcy filing, the diocese was paying all of those claims itself.

In the Diocese of Metuchen, which covers Middlesex, Somerset, Hunterdon and Warren counties, self-insurance reserves and insurance policies have, so far, paid $1.345 million in the last year to eight clergy abuse victims who applied for settlements though the Independent Victims Compensation Fund, church officials said.

Diocese of Metuchen officials said they remain committed to paying financial settlements as an important step toward promoting healing, even if it drains money away from other things.

“Since the diocese’s funds are limited, compensation paid to survivors of abuse could certainly impact the diocese and its needs in other areas of pastoral outreach, such as ministry to the poor, those suffering from addiction and our Catholic schools,” said Anthony Kearns 3rd, the the Diocese of Metuchen’s chancellor and spokesperson.

The Diocese of Trenton, which includes Burlington, Monmouth, Ocean and Mercer counties, said it expects to be able to pay its claims through the Independent Victims Compensation Fund, despite the financial challenges.

“In the area of parish and diocesan operations and ministries, we continue to be heartened by the dedicated and generous support of the faithful during these difficult days,” said Rayanne Bennett, a Diocese of Trenton spokeswoman.