Church Files For Bankruptcy To Avoid Further Scandal

Charlotte Bankruptcy attorney Bryan W. Stone answers the question: “What are the pros and cons of bankruptcy?”


It was recently announced that the Catholic Church diocese for Helena, Montana would be filing for bankruptcy protection. The decision marks the third such filing by catholic dioceses in the area in only the past two months. While some argue that the decision was based on the church’s lack of financial resources, others have criticized the move as yet another attempt to hide wrongdoing by some church officials.


Church Artifacts Charlotte Bankruptcy Lawyer North Carolina Chapter 11 Bankruptcy AttorneyStarting more than 10 years ago, victims began filing lawsuits against the various dioceses for sexual abuse that happened earlier in their lives. For years, the churches managed to settle lawsuits and keep up with their other expenses. Now, despite the fact that many claims have already been dealt with, the three dioceses have filed for Chapter 11 protection.


Critics claim that the decision to file for bankruptcy was not made out of financial necessity, but instead a smart ploy to salvage the reputation and careers of some leaders in the dioceses. The reason is that by filing for bankruptcy protection, all civil litigation against a person or organization must cease. Because the church has now filed, victims are unable to make public claims, shedding light on abuse that was long ago covered up.

Though claims will still be paid out given the vast resources of the Catholic Church, the bankruptcy process allows for a slower and much more private payment process. Claims made against the church at this point will not be brought to light publicly, but will instead be handled quietly by a bankruptcy trustee.


Critics say that there’s been no indication the church has worked hard to avoid the bankruptcy. No church property or real estate has been sold, there’s no sign the church has taken out loans or made a special push for members of the diocese to contribute money to pay victims. All of the above reasons lead some to conclude the bankruptcy was a calculated decision and not a decision of last resort.


The provision of the bankruptcy process the church is relying on is known as the automatic stay. The automatic stay works as an injunction against creditors and others who may be seeking money from the debtor. The automatic stay applies broadly and covers a range of situations, preventing the filing of new lawsuits as well as the continuation of others.


The automatic stay serves several purposes: first, it gives the debtor (in this case, the Catholic Church) an opportunity to reorganize without costly further litigation. Second, the stay prevents creditors from racing one another to court and grabbing what little assets remain. Though this can be good in the case of an individual in over his or her head, it can also be used to hide from perfectly valid civil lawsuits.


If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC today at (704) 370-2828. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice for your particular situation.


About The Author: 

Bryan 1  Bryan 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.  Originally from Macon Georgia, Mr. Stone attended the University of Georgia for a BBA in Banking and Finance and went on to Wake Forest to earn his law degree.  After law school Mr. Stone relocated to Charlotte where he has become quite involved in many local organizations.  He is currently the Chair of “Bravo!” the young professionals organization of Opera Carolina, he also founded the UGA Alumni Association of Charlotte.  In his spare time he enjoys perfecting his BBQ skills for the annual “Q-City BBQ Championships” and playing softball with the Mecklenburg County Bar Softball League.


“Bankruptcy is a convenient solution for church,” by David Clohessy, published at



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