Archdiocese’s bankruptcy has Catholic schools worried about their finances

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What are the pros and cons of bankruptcy ?”


A pending bankruptcy has thousands of Minneapolis, Minnesota-area school officials wondering whether the schools they operate will have enough money to continue operating.

Statue Charlotte Debt Lawyer North Carolina Bankruptcy AttorneyThe Archdiocese of St. Paul and Minneapolis is bankrupt, and schools run by the archdiocese are worried that millions of dollars of debt from clergy sexual abuse lawsuits could affect their finances. The eighty Catholic elementary schools and ten Catholic high schools in the area serve some 30,000 students.

In recent years, enrollment in area Catholic schools has fallen due to negative publicity about clergy sexual abuse. Falling enrollment has placed a strain on school finances, said Catherine Cory, director of the Murray Institute at the University of St. Thomas.

Interviewed by the Minneapolis Star-Tribune, Bishop Andrew Cozzens, vicar for Catholic education in the archdiocese, said that since schools are separately incorporated, they are not at risk in the bankruptcy. Catholic leaders in the area have repeatedly assured schools that the archdiocese’s decentralized corporate structure should shield schools from bankruptcy fallout.

A bankruptcy attorney for the archdiocese, Charlie Rogers, echoed those sentiments, saying that he was not aware of “any basis where the bankruptcy should affect Catholic schools.”

Observers worry, however, that money donated by parishioners for use in schools and in charitable endeavors will instead be used to pay off bankruptcy debts and the “‘battalion’ of lawyers and financial restructuring consultants working on the [bankruptcy] case.”

Observers worry, for instance, that lawyers representing victims of clergy sexual abuse will target a $2 million annual fund set up to assist needy schools. Until last year, money from the same fund flowed directly into the archdiocese. Creditors may argue that the fund was set up to shield the money from claims of creditors in the archdiocese’s bankruptcy, according to Fred Zimmerman, a professor emeritus at the University of St. Thomas.

Many school leaders in the archdiocese are eager to see the abuse claims resolved as soon as possible and are hopeful that fundraising efforts will improve with the abuse claims and the related bankruptcy in the rearview mirror.

Last week, United States Bankruptcy Judge Robert Kressel ordered attorneys representing abuse victims and attorneys for the archdiocese into mediation, naming Judge Arthur J. Boylan to oversee the proceedings. Both sides agreed that a mediated settlement would serve the best interests of all involved. Rogers—the attorney for the archdiocese—said “A prolonged bankruptcy case doesn’t serve the best interests of anyone.”

The order to mediate came in the archdiocese’s first Chapter 11 bankruptcy hearing. The archdiocese filed for bankruptcy protection in early January, saying it did not have enough money to pay the flood of clergy sexual-abuse claimants.

Judge Kressel suggested that litigating the claims in the bankruptcy case could produce attorneys’ fees as high as $17 million. All sides, at least publically, have said they want to avoid that.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.



About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.






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