Bankruptcy fees cost Wilmington Diocese almost $16M

Bankruptcy fees cost Wilmington Diocese almost $16M

Bankruptcy fees have reached the spotlight recently, after they claimed almost one-third of the total payout in a recent Catholic diocesan insolvency case.

The Wilmington Diocese’s move to file for protection under Chapter 11 of the bankruptcy law in 2009 cost $15.8 million in lawyers’ fees and other expenses, The Associated Press reported. About $77 million was left over to pay into a trust for victims of sexual abuse by a former priest.

The Wilmington Diocese filed for bankruptcy protection after receiving a flood of lawsuits filed by survivors of clergy sexual abuse, according to The News Journal in Delaware. Many of these lawsuits would have been past the statute of limitations, but this bar was lifted for a two-year window by Delaware’s 2007 Child Victim’s Act.

Diocese attorney Anthony Flynn, of Young Conaway Stargatt & Taylor, told the news source that the $15.8 million sum for administrative costs was the third highest of the several diocesan bankruptcies nationwide. His firm received about $6.2 million.

“The cost is extremely high,” Flynn told The News Journal. “However you slice it, it was an extremely expensive process. But it was the only process we could use to make sure whatever assets were available could be apportioned among the survivor claimants.”

In stark disagreement, Wilmington attorney Tom Neuberger called the bankruptcy costs “outrageous,” and told the news source that more money could have been distributed had the Diocese agreed to appropriate settlements in mediation. His firm represented 99 of the 152 claimants in the case.

Attorney’s fees and expenses accounted for roughly $12.3 million of the total bankruptcy fees, according to The News Journal. The remaining sum went to financial advisers, consultants, accountants, a pension specialist and the Office of the United States Trustee.

The Wilmington Diocese isn’t the first diocese to fall into bankruptcy in America. As a U.S. bankruptcy attorney, In the past, I’ve written about the financial struggles many catholic churches are facing. Here are a few of my previous posts:

• Milwaukee Archdiocese Filing for Reorganization

• Judge Questions Archdiocesan Bankruptcy Plan

• Bankruptcy Hits the Catholic Church