Joshua Bennett
The Catholic Church has been facing a wave of litigation from survivors of child sexual abuse, resulting in financial hardships for many dioceses. As of May 2025, forty US Catholic religious organizations have sought bankruptcy protection, with 28 Catholic dioceses and three religious orders filing for bankruptcy since 2004. The high cost of settling abuse claims has been a major factor in these bankruptcy declarations, with California's Catholic church paying over $1 billion in settlements. While the church claims bankruptcy ensures fair and equitable compensation for all survivors, some survivors view it as a way to silence them.
| Characteristics | Values |
|---|---|
| Number of Catholic Dioceses that have filed for bankruptcy in the US | 28 |
| Number of Catholic Dioceses that have filed for bankruptcy in US territories | 3 |
| Number of US Catholic religious organizations that have sought bankruptcy protection in chapter 11 as of May 2025 | 40 |
| Number of US states that have opened windows for temporary revival | 19 |
| Number of US territories that have opened windows for temporary revival | 3 |
| Number of states that have opened "permanent windows" on their statutes of limitations | 2 |
| US Dioceses currently in bankruptcy proceedings | Albany, Buffalo, Camden, New Orleans, Norwich, Oakland, Ogdensburg, Rochester, Rockville Centre, San Juan (Puerto Rico), Santa Fe, and Syracuse |
| US Dioceses that have completed bankruptcy proceedings | Agaña (Guam), Davenport, Duluth, Fairbanks, Gallup, Great Falls-Billings, Harrisburg, Helena, Milwaukee, New Ulm, Portland in Oregon, St. Paul and Minneapolis, Spokane, Stockton, Tucson, Wilmington, and Winona-Rochester |
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What You'll Learn
The high cost of settling abuse claims
The Catholic Church has faced numerous lawsuits worldwide over allegations of clergy abuse. While the total amount paid in settlements worldwide has never been determined, it is estimated that the Church has paid out more than $3 billion in major settlements and awards in the United States alone. Some groups believe this number underestimates the actual cost of covering up clergy abuse for nearly half a century.
One of the largest settlements involved the Archdiocese of Los Angeles, which awarded $600 million to a group of more than 500 victims abused by 221 individual clergy members. Each claimant received approximately $1.3 million. The Archdiocese of Milwaukee, which had already paid out over $29 million to settle 200 cases over 20 years, also filed for bankruptcy in 2011 due to the financial strain of additional lawsuits.
The Diocese of Tucson reached an agreement with its victims, paying $22.2 million as part of its bankruptcy settlement. The Diocese of Spokane, Washington, agreed to pay at least $48 million in compensation, while the Diocese of Harrisburg disclosed liabilities between $50 million and $100 million with assets of less than $10 million when filing for bankruptcy. These cases highlight the significant financial impact of settling abuse claims, often resulting in bankruptcy filings by Catholic dioceses.
The cost of settling abuse claims has not only resulted in financial strain but has also damaged the reputation of the Catholic Church. Many early settlements included confidentiality agreements, prohibiting victims from publicly speaking about the abuse or settlement details. However, with more victims coming forward and legal systems supporting them, the Church is facing increased scrutiny and pressure to hold clergy members accountable.
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A reduction in revenue from mass collections
The COVID-19 pandemic has had a significant impact on the finances of Catholic dioceses, with the cancellation of public masses resulting in a loss of revenue from offertory collections. This has created financial strain for parishes, dioceses, and national collections, as collections are a primary source of funding for many.
In response to the pandemic, many dioceses cancelled public masses to prevent the spread of the virus. This led to a sudden cessation of offertory collections, which are a significant source of income for the Church. With no physical services being conducted, parishioners were no longer placing donations in the collection basket during mass. This had a detrimental effect on the budgets of Catholic institutions, causing financial uncertainty and raising questions about their ability to continue paying employees.
The impact of the pandemic on church collections was exacerbated by the economic downturn, which affected the financial situation of parishioners themselves. Some Catholics may have faced job loss or reduced income, impacting their ability to donate to the Church. This was compounded by the fact that, unlike other organizations, the Church heavily relies on donations and collections as a primary source of funding, rather than having a diverse range of income streams.
To mitigate the loss of revenue, some dioceses encouraged online donations and virtual giving platforms. However, at the time, only a small percentage of parishes offered online donation services, and the sudden shift to virtual giving may not have been sufficient to offset the loss of in-person collections.
The reduction in revenue from mass collections during the pandemic highlighted the financial vulnerability of the Catholic Church and its reliance on the financial contributions of parishioners. This period of financial strain also brought into question the Church's eligibility for and acceptance of government aid, with some questioning whether the Church should have accessed funds intended for struggling businesses.
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A wave of new lawsuits
The Archdiocese of Milwaukee, for instance, filed for bankruptcy in 2011 due to more than 23 lawsuits and the inability to afford hefty legal fees. Similarly, the Diocese of San Diego filed for Chapter 11 protection in 2007 just hours before around 150 lawsuits were to be heard, becoming the largest diocese at the time to employ this strategy. The Diocese of Fairbanks also filed for bankruptcy in 2008 after 130 civil suits were filed by Alaska Natives alleging abuse by priests and other church employees dating back to the 1950s.
The Duluth Diocese and the Archdiocese of St. Paul and Minneapolis in Minnesota have also filed for bankruptcy, with the Diocese of New Ulm following suit in 2017 due to numerous lawsuits related to sexual abuse by clergy. In 2018, the Roman Catholic Diocese of Winona-Rochester announced its intention to file for Chapter 11 bankruptcy, and the Diocese of Buffalo filed for bankruptcy in 2020 as a result of numerous sexual abuse lawsuits.
The financial impact of these lawsuits is significant, with the Catholic Church spending around $615 million on sex abuse cases in 2007 alone. Additionally, the Diocese of Duluth reached a $40 million settlement with 125 sexual abuse survivors, and the Archdiocese of Milwaukee paid out over $29 million to settle 200 cases over two decades. The high cost of settling abuse claims has been a major factor in many dioceses' decisions to declare bankruptcy.
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The statute of limitations being revived
The Catholic Church has been accused of spending millions of dollars to fight state statute of limitations reforms. A report from 2021 estimates that the Church spent over $10 million on lobbyists to prevent the revival of statute of limitations. This included $3 million on lobbying, $600,000 in New Jersey, and $60,000 in Rhode Island. The Church has also been accused of spending money on lobbying efforts against victims of sexual abuse seeking legal redress.
The revival of statute of limitations laws has allowed survivors of childhood sexual abuse by Catholic priests a chance to tell their stories and seek justice. States like California, Virginia, Minnesota, and Delaware have extended the statute of limitations for civil suits against the Church when Church officials failed to protect children from abuse. This has resulted in hundreds of millions of dollars in legal fees and payouts, and the bankruptcy of some dioceses.
The Los Angeles archdiocese, for example, agreed to pay $660 million in settlements to more than 500 claimants after the window was opened. The Diocese of Rockville Centre is another example of a diocese that has declared bankruptcy due to the revival of statute of limitations laws. As of May 2025, forty US Catholic religious organizations have sought bankruptcy protection in chapter 11, with twenty-six cases concluded and fourteen pending.
The revival of statute of limitations laws has also sparked debates about the fairness of such laws. Some argue that the social and emotional pressure for victims of sexual misconduct to stay silent can begin to lift once other victims come forward. Others argue that in civil cases, where the victim controls when claims are filed, it is the victims' fault if they fail to bring the case quickly.
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The process of diocesan bankruptcy
Diocesan bankruptcy is a complex process that involves multiple legal and financial considerations. Here is an overview of the key steps and aspects of the process:
Step 1: Financial Analysis and Planning
The diocese typically begins by assessing its financial situation and exploring alternatives to bankruptcy. This includes analysing income, expenses, assets, and liabilities to understand the financial health of the diocese. If bankruptcy is deemed necessary, the diocese may develop a financial plan to address the immediate and long-term financial challenges.
Step 2: Legal Consultation and Strategy
The diocese seeks legal counsel from experts in bankruptcy law and Canon Law, which is the legal system within the Catholic Church. Lawyers advise on the applicable laws, the bankruptcy process, and the potential impact on the diocese's operations and assets. The diocese may also develop a legal strategy to protect its interests during bankruptcy proceedings.
Step 3: Filing for Bankruptcy
The diocese files a petition for bankruptcy with the appropriate court, typically under Chapter 11 of the U.S. Bankruptcy Code. This allows the diocese to reorganise its finances and develop a plan for repaying creditors while continuing its operations. The diocese becomes known as a "debtor-in-possession," meaning it retains control of its assets and operations during the bankruptcy process.
Step 4: Involvement of Creditors and Committees
During bankruptcy, the diocese interacts with various creditors, including alleged abuse victims, insurance companies, and other parties with financial claims against the diocese. Committees may be formed to represent different creditor groups, such as unsecured creditors or tort claimant creditors. These committees participate in negotiations, review financial disclosures, and may file objections or responses to the diocese's proposals.
Step 5: Mediation and Negotiation
The bankruptcy process involves mediation and negotiation between the diocese and its creditors. This includes discussing settlement amounts, repayment plans, and the treatment of different types of claims. The diocese may propose plans for reorganisation or restructuring to address its financial obligations and seek approval from the creditors and the court.
Step 6: Court Proceedings and Disclosure
The bankruptcy court oversees the process, ensuring compliance with legal requirements and resolving disputes. The diocese is required to make disclosures, including financial statements, asset valuations, and operational information. The court may hold hearings, review objections, and issue orders or rulings on various matters, such as production of documents or establishing deadlines.
Step 7: Reorganisation and Emergence from Bankruptcy
The diocese works towards reorganisation by implementing the approved plan for addressing its financial obligations. This may involve selling assets, restructuring operations, or establishing compensation programs. Once the diocese has fulfilled its obligations under the bankruptcy plan, it emerges from bankruptcy with a restructured financial foundation.
It is important to note that the process of diocesan bankruptcy can vary depending on the specific circumstances of each case, the applicable laws, and the decisions made by the diocese, creditors, and the court. The impact of bankruptcy on the diocese's operations, parishes, and insurance providers is also a complex and evolving aspect of this process.
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Frequently asked questions
No. As of May 2025, 40 Catholic religious organizations have sought bankruptcy protection in Chapter 11, with 26 cases concluded and 14 pending.
Catholic dioceses are declaring bankruptcy due to the high cost of settling abuse claims.
Dioceses that have declared bankruptcy include Albany, Buffalo, Camden, New Orleans, Norwich, Oakland, Ogdensburg, Rochester, Rockville Centre, San Juan (Puerto Rico), Santa Fe, and Syracuse.
Dioceses that have completed bankruptcy proceedings include Agaña (Guam), Davenport, Duluth, Fairbanks, Gallup, Great Falls-Billings, Harrisburg, Helena, Milwaukee, New Ulm, Portland in Oregon, St. Paul and Minneapolis, Spokane, Stockton, Tucson, Wilmington, and Winona-Rochester.
