Christianity, Churches and Bankruptcy
During economic devastation, it’s easy to forget the Bible’s defense and embrace of the poor. The meek shall inherit the earth, (Matthew 5:5), yet the extreme champion of excess repeatedly drives our country into financial ruin. Since the Bible is the go-to guide for laws (case in point: The eating of fat is prohibited forever, Leviticus 3:17), what does the scripture say about bankruptcy? While the Bible can be stringently unforgiving and demand stoning for those who work on Saturdays, it is very forgiving of debts. Deuteronomy 15:1 explicitly recommends debts to be forgiven routinely every 7 years, even if that person is a perfect stranger.
How do struggling churches file for bankruptcy? They often don’t need to, as churches are legally tax exempt based on their status as charitable organizations. As a charitable organization, they also cannot be driven into bankruptcy based on a heavy arrearage to creditors. As a result it’s extremely uncommon for an individual church to file for Chapter 11 bankruptcy.
In an unprecedented 2004 incident, the Portland, Oregon Catholic archdiocese became the first archdiocese to ever file for a bankruptcy to evade a civil sexual abuse suit. They did so strategically to avoid a costly sexual abuse trial that was scheduled to account 170 claimants of abuse by area priests and clergy. The collected alleged victims filed $130 million in claims, and the diocese responded by filing for a bankruptcy that rendered its priests unaccountable publicly to a scathing trial.
The archdiocese’ insurance paid off $52 million to alleged victims and $40 million more was paid out on loan according to the bankruptcy agreement, which stipulated no priest would be forced to testify. A U.S. bankruptcy judge and a total of 89 lawyers oversaw the proceedings, and no churches, properties, or Catholic schools were liquidated as a result of the bankruptcy. Portland’s obscure blend of religion and bankruptcy set the precedent for five more archdiocese abuse proceedings, for Spokane; San Diego; Davenport, Iowa, and Tucson, Arizona. For an entity like a business to file for bankruptcy to evade serious civil suits is frowned upon, especially in such a sensitive case. The leadership of the Catholic Church was heavily criticized for these bankruptcies as sweeping years of abuse and hundreds of claimants’ hard evidence under the rug.
To find out how bankruptcy can apply to all walks of life regardless of what altar you kneel before, call the bankruptcy experts at Legal Helpers. Our legal expertise can keep you financially unscathed. Call us at 1.800.260.1402.
Subscribe to this comment's feed
