The Archdiocese of Milwaukee, facing multiple lawsuits from victims of sexual abuse, is seeking Chapter 11 protection under federal bankruptcy laws, according to a statement released early this month.
A June tax audit showed the Archdiocese had $98.4 million in assets. However, more than $90 million of those assets do not belong directly to the church. Some are donations with designated use restrictions or simply do not belong to the archdiocese.
The church had only $4.6 million available for lawsuits, but a reorganization will increase that number based on the compensation owed to the victims, Archdiocese spokesperson Julie Wolf said. More than $29 million has already been spent over the past two decades to cover costs associated with the church’s lawsuits.
Further straining the church’s coffers, the archdiocese in November lost a case in the Wisconsin Circuit Court of Appeals that would have required insurance companies to help pay the church’s settlement bills, Wolf said.
“Legal costs continue to choke us and would increase as pending lawsuits move toward trial,” said Archbishop Jerome Listecki. “This proceeding will ensure that all victims with unresolved claims against the archdiocese are treated equitably.”
Chapter 11 allows the church to reorganize its finances under federal bankruptcy laws. The church must propose a plan of reorganization and have it approved by creditors, who in this case appear to be the victims of priest misconduct, Jonathan Lipson, a University of Wisconsin law professor, said in an e-mail to The Badger Herald.
“It appears the archdiocese has become more forthcoming and conciliatory about the harms that occurred,” Lipson said, “which may help to encourage creditors to approve the plan.”
A federal court will decide how much of the archdiocese’s financial obligations can be paid, followed by the creation of a payment plan to see that the obligations are met, Wolf said.
The archdiocese has been trying for some time to reduce costs in order to settle pending lawsuits.
As a response to dwindling funds, since 2002 the archdiocese has made many cuts – including a 40 percent staff reduction – Wolf said.
Lipson said making assets like cemeteries and other church property available to creditors could be very bad for parishioners. Still, he believes the church expects to benefit.
“The archdiocese could benefit if it confirms a plan that discharges – reduces or eliminates – the debts to parishioners while also maintaining control of its operations,” Lipson said.
According to Wolf, filing for Chapter 11 bankruptcy is the only way to resolve victim claims while retaining the ability to fulfill its responsibilities to its membership.
During the reorganization, normal church activities are allowed to continue. However, a bankruptcy court judge will supervise non-routine decisions and expenditures and either approve or disapprove based on whether the transactions are sustainable.
The church believes it will be able to continue providing programs and services central to its ministry throughout the reorganization process, Wolf said.
She added the reorganization process is expected to take 12 to 18 months.