In a surprise move, Vermont’s Roman Catholic Diocese seeks to dismiss its 2-year-old bankruptcy case

Vermont’s Roman Catholic Diocese is marking this week’s second anniversary of its request for a Chapter 11 financial reorganization plan by asking a U.S. Bankruptcy Court judge to dismiss its case, which so far has cost $2 million in legal fees “with no end in sight,” church lawyers said.

The state’s largest religious denomination had filed its initial call for help on Sept. 30, 2024, when it said a past series of nearly 70 priest misconduct settlements had reduced its monetary holdings by half — to about $35 million — with more than 100 other abuse claims dating as far back as 1950 yet to be resolved.

Two years later, attorneys for the church and its creditors — who include more than 100 claimants of clergy abuse — held private mediation sessions on Monday and Tuesday. At the end of those meetings, the diocese offered creditors a proposed $29.4 million collective settlement that would average $247,000 per claimant, it wrote in a court filing.

An official committee representing creditors declined the diocese’s offer, its lawyers said, having learned over the weekend that the court was set to consider the claimants’ related lawsuit seeking access to an additional estimated $500 million in local parish assets the church sheltered in trusts in 2006 .

On Wednesday, the diocese responded by requesting dismissal of the Chapter 11 case, for which it has spent $2 million for its attorneys and, as required by federal law, counsel for creditors, court records show.

Burlington-based Judge Heather Cooper has set a hearing on the diocese’s request for Dec. 8.

“The diocese does not believe continued mediation in this case will be productive or successful,” church counsel wrote in its filing.

“Dismissal,” it continued, “will preserve (church) resources and allow the diocese and the survivors to pursue resolution through alternative means, free from the mounting costs of Chapter 11 administration.”

In response, creditors said they would oppose the move.

“The diocese is not being forced to litigate,” committee counsel Brittany Michael said in a statement. “It is choosing to litigate every issue the hard way and then blaming the bill on everyone else.”

Daniel Stack is one of several committee members whose clergy abuse claims were put on hold when the diocese filed for Chapter 11 protection.

“Two years ago, the diocese avoided accountability on the eve of my trial and said bankruptcy was necessary for survivors to be treated fairly,” Stack said in a statement. Now, “the diocese wants to leave the process altogether. That is not the conduct of an institution acting in good faith, it is a second attempt to avoid accountability.”

Under federal law , any financial reorganization plan requires approval by both the court and creditors. Ending the bankruptcy court proceedings without an agreement won’t erase the diocese’s challenging financial picture. Instead, it will revive the abuse lawsuits sidelined by the Chapter 11 filing and send the church and abuse claimants into a series of individual civil trials.

The judge had aimed to draw the case to a close this summer when she threatened to reject the church’s bid to reorganize its finances if a viable plan wasn’t submitted by this week’s two-year anniversary of requesting help.

“My concern is that I don’t want it all going to the professionals,” Cooper said of church funds paying for lawyers. “I do think that the survivors probably would like to have something left over at the end of the day.”

Then this past weekend, the judge signaled she was set to hear a lawsuit by creditors seeking access to not only the diocese’s state-level bank and building assets but also an estimated half-billion dollars in local parish property and possessions.

“Unless settled,” the judge has written of the contested assets of nearly 70 parishes, “there may be years of litigation ahead and millions of dollars spent in attorneys’ fees and costs that could have paid (for) valid abuse claims.”

The court also had scheduled an evidentiary hearing for November on the diocese’s request to sell its flagship Rice Memorial High School in South Burlington to supporters for $4.3 million — or 14% of a church-commissioned appraisal of $30.5 million.

Both the lawsuit over local parish assets and request to sell Rice remain on the court calendar.

The Vermont church is one of 44 U.S. Catholic entities to spend time and money seeking Chapter 11 protection since news of a nationwide priest misconduct scandal broke in 2002.

The Diocese of Rockville Centre in New York has reported the highest legal fees for such a case, at more than $100 million over four years before resolution in 2024, according to news reports. The Archdiocese of New Orleans is second at nearly $60 million over five years before resolution in 2025, while the Archdiocese of Milwaukee is third at $23 million over 4½ years before resolution in 2015.

This story was originally published by VTDigger and distributed through a partnership with The Associated Press.