When Churches Reorganize

Abstract

This Article combines an analysis of documents submitted in connection with Chapter 11 cases filed by religious organizations with the results of in-depth interviews with these organizations’ leaders and their bankruptcy attorneys to assess whether reorganization has the potential to offer an effective solution to these debtors’ financial distress. In doing, it makes three contributions. First, it identifies a subset of organizations that seemed more likely to turn to bankruptcy: small congregationalist and non-denominational churches, often with predominately African-American membership. The Article pinpoints salient questions about these churches’ access to credit and use of bankruptcy for future study. Second, it highlights practical considerations for the attorneys, judges, and parties who will be involved in future cases filed by faith-based institutions. Third, it tracks the post-bankruptcy outcomes of a portion of the religious organizations and finds that 64% remained operating either in their original building or in a new location months after the closing of their bankruptcy cases, outcomes which are important to ongoing debates about business bankruptcy policy.

Note: This article was previously titled: Perspectives on Religious Organizations' Reorganizations.

Keywords: bankruptcy, Chapter 11, reorganization, nonprofit organizations, religious organizations, religion, financial distress, lawyering, empirical