Sunday, April 27, 2014
Pamela Foohey (Illinois) has posted Perspectives on Religious Organizations' Reorganizations, to be published in the American Bankruptcy Law Journal. Here is the abstract:
This Article, written in conjunction with the Empirical Studies in Bankruptcy panel hosted by the Section on Creditors’ and Debtors’ Rights at the AALS’ 2014 Annual Meeting, 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. The data indicate that Chapter 11 oftentimes can be beneficial for religious organizations. For instance, over 60% of the Chapter 11 cases discussed by attorneys ended productively in that the debtor confirmed a reorganization plan or entered into an agreement with its creditors that allowed the congregation to continue operating post-bankruptcy. Based on attorneys’ experiences, in the future, focusing on organizational structure, cash collateral, and sources of revenue may enhance the efficiency and effectiveness of these reorganizations.
The interviews also call attention to two aspects of these bankruptcies that were less obvious from an examination of court records alone. First, a subset of religious organizations may more likely to file under Chapter 11: smaller congregationalist and nondenominational Christian churches with a predominately minority membership base. Second, these churches’ secured creditors may negotiate in ways that lead these churches to turn to bankruptcy. Further research regarding the denominational and demographic skew of religious organization debtors and the role of secured creditors in funding religious organizations will help to refine our understanding of these institutions’ financial distress.