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Does diocesan bankruptcy affect compensation of sex abuse victims?

On behalf of Soloff & Zervanos, P.C. Posted in Sexual Abuse on Friday, January 9, 2015.

The Catholic Church is no stranger to litigation or money problems. Since victims of clergy sexual abuse began pursuing lawsuits against the church en masse, 11 Catholic dioceses across the U.S. have filed for bankruptcy protection.

To be sure, child sexual abuse can (and does) occur in nearly all religious organizations. But the problem seems to be especially widespread among the Catholic Church. With so many victims now coming forward and pursuing litigation against individual dioceses, it soon becomes clear that financial resources are limited. When a diocese files for bankruptcy protection, does that action limit how much compensation the victims receive?

The answer to that question is complicated and depends on a number of factors. When a diocese files for bankruptcy, it does so with the intention of remaining an ongoing entity. To that end, it needs to rework finances in a way to satisfy its creditors’ claims as much as reasonably possible. Unfortunately, sex abuse victims awaiting compensation are usually pooled with the dioceses’ other creditors.

How much they get paid is dependent upon numerous factors, including:

  • What other financial obligations the diocese has yet to meet
  • How many other victims have come forward to sue the diocese
  • How a given diocese has legally structured itself to shield assets from lawsuits
  • How much money the diocese spends on litigation prior to filing for bankruptcy

It is patently unfair that religious organizations can limit their financial liability to sex abuse victims through various actions, including bankruptcy. It is also patently unfair that dioceses often work harder to shield themselves from liability than they do to prevent child sex abuse.

That being said, justice is possible. Clergy sex abuse victims must continue to come forward and make their voices heard, even if their potential compensation is limited by diocesan bankruptcy.

Source: MPR News, “Bankruptcy could help Winona diocese avoid sex abuse lawsuits,” Martin Moylan, Oct. 7, 2014