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Catholic Abuse Victims: Major Victory in Recent Guam Chapter 11 Case

| May 27, 2022 | Bankruptcy

By: Laura Day DelCotto

There have been approximately 30 Catholic Diocese chapter 11 bankruptcy cases spread all over the US and also in Guam, an unincorporated US territory in the Western Pacific.

What Assets Can Pay Victims?

The major issue in most all these different bankruptcy court settings is a fight, and either a settlement or a court ruling, over which assets are available as “property of the estate” to be used to pay creditors.  The results have not been uniform. The recent Guam case is a large victory for creditors. “Creditors” in Archdiocese cases are primarily victims of past clergy sexual abuse, with claims that are often in unknown amounts.

Property of the Estate

The term “property of the estate” is a statutory term of art used in all bankruptcy cases. It is a statutory definition found at 11 U.S.C. Section 541, with specific sub-types of assets being described in the Bankruptcy Code.

Most Archdiocese cases have the Catholic church taking the position that assets titled in individual churches, parishes and schools are not available to pay victims, under various legal theories. Millions of dollars’ worth of buildings, parking lots, vehicles, cemeteries, bank accounts and other property are at issue in these battles.

Recent Ruling Helps Victims

The Archdiocese of Agana (Guam) case recently held a multi-week trial on the Official Committee of Creditors’ arguments to include these assets for creditors, before a US District Court Chief Judge. Victims as well as the archbishop testified, and press reports that over 100 victims attended via Zoom to watch the proceedings.

As a result of the recent opinion, an additional $55 million-plus in assets are available to creditors. In this case, they were listed as “disputed” assets. In some cases, the victims must litigate in order to even obtain information about what assets exist.

At the end of the day, after all the (very expensive) litigation, all sides expressed similar sentiments to the effect that the goal of everyone is to justly compensate the abuse survivors while keeping the parishes, schools and ministries open. This balance is delicate and this is just one example among many.

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset preservation and business restructuring law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy and complex litigation. For more information please call (859) 231-5800, email [email protected] or reach us on our contact page.