“Now, facing at least 160 new cases, with excess property depleted, with insurance for many of the years either nonexistent or exhausted it is impossible to see any way forward without recourse to the bankruptcy protections our country makes available.”
Filing for bankruptcy will provide “a process to carefully evaluate and compensate, as fairly as possible, those who have come forward with allegations of sexual abuse.” It will allow all parties to resolve their claims under the bankruptcy court’s supervision, and the diocese may deal with these issues collectively rather than one by one.
“At the same time, the process provides a way for the diocese to continue the various charitable ministries in which it is engaged,” he said.
Bishop Vasa said only the diocese’s “corporation sole” known as the Roman Catholic Bishop of Santa Rosa is filing for bankruptcy. Parishes and schools are separate civil corporations or ecclesial entities and “should not be parties to this filing.”
The bankruptcy proceedings will determine whether any parish and school entities will take part in the process, he said.
The diocese provided a question-and-answer briefing that addressed several questions, including whether parishes or schools will be forced to close because of the bankruptcy process. The diocese noted that creditors have challenged the separate corporate status of Catholic parishes or schools in other dioceses’ filings.
“That is why our pastors and other religious entities of the diocese have sought independent legal counsel to represent parish interests in this process.”
The diocese noted that the Legislature could again change the law to create more “look-back windows” for lawsuits or eliminate statutes of limitations entirely. The most recent changes now allow an abuse victim to sue by the age of 40 years or five years after they realized the abuse caused harm to them. Previously, the statute of limitations barred lawsuits after the victim turned 28 years old.
A bankruptcy reorganization protects against any lawsuits in the future, it said.
“It is the only way to get all of the claimants to the table at once and negotiate an agreement that works for all parties,” the diocese said.
“A thorough process is required, and will be undertaken, to notify the public of this action and to assure that any survivors of child sexual assault have an opportunity to file claims.”
(Story continues below)
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In February, Cardinal Robert McElroy of San Diego announced that his diocese could have to resort to a declaration of bankruptcy in 2023 to manage the cost of hundreds of new abuse claims.
More than two dozen U.S. dioceses, including two in U.S. overseas territories, have entered into bankruptcy proceedings, the vast majority in the past decade. California’s Diocese of Stockton went through a three-year bankruptcy period from 2014 to 2017.