Vermont’s Roman Catholic Diocese is asking a U.S. Bankruptcy Court for Chapter 11 protection to reorganize finances depleted by past misconduct lawsuits. Photo illustration by Kevin O’Connor/VTDiggerA U.S. Bankruptcy Court judge has expressed “interim” approval for the first steps in the Vermont Roman Catholic Diocese’s petition to reorganize finances depleted by clergy sex abuse lawsuits.Judge Heather Cooper, holding an initial hearing Thursday in Burlington, voiced support for the state’s largest religious denomination to temporarily maintain its current staff, bank accounts and bookkeeping procedures as it becomes the nation’s 40th Catholic entity to seek Chapter 11 protection.“This is an interim order,” Cooper said before scheduling another hearing for Nov. 26.Under federal law, the diocese must present the court with a tally of its financial assets and liabilities and petition for Chapter 11 help. The judge, in turn, will decide whether to allow church leaders to develop a reorganization plan that would require approval from both the court and an appointed committee of creditors.At Thursday’s 1½-hour hearing, church counsel suggested the court help cap a continuing wave of lawsuits for a scandal dating back to 1950 by collecting unreported claims through a confidential process that would include a filing deadline yet to be set.“This is an opportunity to finally bring conclusion,” said James Baillie, a lawyer from the Minnesota firm Fredrikson & Byron.But the judge delayed any decision on a process and whether or not it would prohibit future lawsuits until the court formed a committee to represent claimants and other creditors.In a public statement released before the hearing, Bishop John McDermott noted the diocese not only had settled at least 60 past lawsuits for more than $30 million, but also faced several dozen unresolved claims “with very limited unrestricted diocesan funds, little diocesan property to sell and likely no insurance coverage to help contribute towards settlements.”“Even if the diocese could find a way to settle these present cases outside of bankruptcy,” McDermott continued, “the diocese could face additional cases in the future with no way to fund settlements or pay jury awards from trials.”Church leaders filed for bankruptcy protection with the idea “funds will be allocated among all those who have claims against the diocese while hopefully allowing the diocese to maintain its essential mission and ministries,” the bishop concluded.The reorganization request — which the diocese has outlined on its website — is intended to cover only the state administrative office and not the separately funded local entities it oversees, including 63 parishes, 12 schools, three residential care homes and Vermont Catholic Charities.“It is my hope that the reorganization process will have little impact upon our parishes and ministries,” McDermott said in his statement. “However, I cannot guarantee that these separate entities will not have to contribute to the final reorganization plan.”The bishop noted that any resulting sadness from the state’s reported 100,000 Catholics “pales in comparison to the pain suffered by victims of abuse.”“For that and for every aspect of dealing with the crimes of these clergy,” he wrote, “I sincerely apologize.”But abuse survivors and their supporters aren’t necessarily appeased. Celeste Laramie, one of at least 10 lawyers handling unresolved claims, noted the diocese has spent more than $1 million in the last five years for defense counsel, all while sheltering an estimated $500 million in local parish assets in separate trusts.“The recent filing by the diocese is more reflective of moral bankruptcy than actual financial bankruptcy,” Laramie said in an email. “I have fought for these survivors in the trial courts, and I will continue to fight for these survivors in the bankruptcy court.” The national Survivors Network of those Abused by Priests has expressed its own concerns.“We suspect that the real motive behind the decision is to prevent disclosures about what happened to these brave survivors as children,” it said in a statement.Penn State Law professor Marie Reilly, who is tracking Catholic bankruptcy proceedings on a website, said the process could bring both challenges as well as potential benefits, especially for those whose abuse claims were filed later rather than sooner or not at all.“Outside of bankruptcy, in simple terms, it’s like a race,” Reilly said in an interview. “In the state court system, the first claimants to get to a jury verdict are going to tap all of whatever insurance coverage you might have, leaving nothing for all of the other people.”In bankruptcy, all claimants are represented by an appointed committee.“You move from an individualized claim validation system through trial of the evidence in each particular case to a collective, compulsory mediated solution,” the professor said. “If you assume that all claimants are honest and their claims are valid, it’s preferable, from a moral standpoint, to come up with a solution where all of them can participate in some kind of compensation plan.”Reilly noted that when the Boy Scouts of America filed for bankruptcy for similar reasons in 2020, it faced some 800 misconduct lawsuits. After the court sought unreported abuse claims, the number rose to more than 80,000.“People who don’t want to talk about this with a whole bunch of strangers may say, ‘I never would have brought litigation in state court, but I don’t have any problems filling out a form and having it submitted, subject to confidentiality,” the professor said. “For many claimants, the negotiated solution in bankruptcy may turn out to be preferable to how they would have fared had their claims been subject to trial.”Read the story on VTDigger here: Court voices ‘interim’ approval for Vermont Roman Catholic Diocese’s bankruptcy plans.