Bankrupting the Faith

Abstract:     
This Article presents the results of a comprehensive empirical study of every religious organization that filed bankruptcy under Chapter 11 from 2006 to 2011. It examines the institutions’ characteristics, reasons for filing, and case outcomes to investigate whether Chapter 11 is an effective solution to their financial problems. The results suggest a need for further research into courts’ procedures for assessing plans, and confirm previous findings that bankruptcy courts overall process cases quickly and that a greater percentage of debtors confirm and complete plans than historically thought. The analysis also reveals that the religious organizations’ cases straddle two main accounts of Chapter 11 as either preserving the going-concern value of a business or a labor-market intervention for an entrepreneur. This result supports the validity of recent challenges to the focal point of business reorganization on the corporate entity, and demonstrates that the business itself also must be assessed in some small business reorganizations, even if only in the cases of religious institutions.

Number of Pages in PDF File: 58

Keywords: bankruptcy, Chapter 11, reorganization, religious, church, non-profit

Accepted Paper Series