Avoiding Moral Bankruptcy

Abstract

Faced with hundreds of clergy sexual misconduct cases, the Boston Archdiocese hinted that it was considering filing for bankruptcy before later settling the cases. This Article explores the implications for a religious organization of filing for bankruptcy. The Article focuses on four obvious problems with the bankruptcy alternative: the possibility that the case would get kicked out as having been filed in bad faith; the question of what church assets would get pulled into the bankruptcy process; the fact that the church might be subject to intrusive scrutiny in bankruptcy; and the moral implications of a bankruptcy filing. These concerns suggest that religious organizations should only file for bankruptcy as an absolute last resort. Nevertheless, the Article concludes that it may be appropriate to file for bankruptcy under some circumstances if the religious organization commits to paying all of its creditors in full.

Keywords: Bankruptcy, religious organization and bankruptcy