The Chapter 11 filing, which freezes all pending litigation against the diocese, came as the first of some eight lawsuits was scheduled to go to trial in Kent County Superior Court.
Lawyers for the diocese and the plaintiffs spent much of the weekend in an effort to negotiate a settlement. The breakdown of those negotiations makes the diocese the first on the East Coast to file for bankruptcy, joining six other dioceses that have sought protection in bankruptcy under the weight of claims of sexual abuse.
Bishop Malooly added, “Our hope is that Chapter 11 proceedings will enable us to fairly compensate all victims through a single process established by the Bankruptcy Court.”
But Thomas S. Neuberger, a lawyer representing 88 people who have accused diocesan priests of sexual abuse, called the bankruptcy filing an “outrage.”
According to court documents, the diocese and certain parish churches are defendants in 131 sexual-abuse cases.
The diocese has assets of as much as $100 million and liabilities of as much as $500 million, the court papers say.
So what happens if the creditors (who include the plaintiffs) can’t agree on a reorganization plan? Does this convert to Chapter 13, with all the assets getting sold at auction? (And I guess the Mother Church has some kind of holding-company status that exempts its assets from being at risk — nice foresight.)