A U.S. Bankruptcy Court judge in Vermont has authorized clergy abuse claimants to pursue legal action against parish assets held by the state’s Roman Catholic Diocese as part of the institution’s ongoing Chapter 11 bankruptcy reorganization. Judge Heather Cooper issued a written order permitting creditors to target both the diocese’s highest-level financial and real estate holdings as well as trust-sheltered property and possessions belonging to nearly 70 parishes throughout the state.
The order grants permission for an “adversary proceeding” — a lawsuit to determine whether claimants have legal entitlement to these local holdings. Cooper noted in her July 28 ruling that years of litigation and millions in attorney fees could potentially result, funds that might otherwise support abuse settlements. The diocese’s leadership declined to comment but had filed an objection to the asset pursuit just days prior. The organization now faces two paths: pursue settlement negotiations in mediation discussions or continue litigation, having already spent $2 million in legal fees over the past two years.
The dispute centers on whether nearly $500 million in collective parish property should be made available to creditors. The diocese had attempted to shield these local assets in 2006 by placing them in trusts. However, attorneys representing more than 100 abuse claimants argue all church assets must be available for compensation. The diocese entered Chapter 11 protection after settlements for priest misconduct reduced its highest-level financial reserves to approximately $35 million.
The Vermont diocese is among 44 U.S. Catholic entities that have sought Chapter 11 protection. According to records, the organization has paid $34.5 million to settle 67 clergy misconduct lawsuits over the past two decades while facing 119 additional pending claims with origins dating back decades. To address financial challenges, the diocese has sold its South Burlington headquarters and a senior living facility, with additional asset transfers under consideration.
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