A Chapter 11 bankruptcy filing by the Buffalo Catholic Diocese is imminent, according to a financial report released by the Diocese late Thursday afternoon.
The Diocese says due to the number of claims, lawsuits, and alleged damages due to the Child Victims Act, it has determined that filing a voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy Code is the best course of action moving forward.
The Diocese believes filing for bankruptcy will ensure the fair treatment of all victims looking for compensation, and is necessary for business obligations moving forward.
In September, the Rochester Catholic Diocese was the first of New York state's eight Dioceses to file for bankruptcy protection due to the decade-long child sexual abuse scandal plaguing the Catholic Church.
Attorney Steve Boyd, who represents some of the clergy abuse victims, says the Buffalo Diocese has insurance coverage that would help resolve these cases, but for victims, bankruptcy could be a step back.
"Everyone who has filed a case goes from being a plaintiff to a creditor. And everyone who has not filed a case will be given a deadline to bring a creditor claim into bankruptcy court," explained Boyd.
This move cuts down the discovery process, meaning for cases filed after bankruptcy, the Diocese could avoid making the details of how administrators handled the these claims public.
"These victims want to see the personnel files…they want to know exactly what the bishop of the day knew when they were children and what they knew before they were abused," said Boyd.
Boyd, who also is involved with cases in Rochester, says a bankrupt entity cannot get out of bankruptcy unless their creditors agree. That means a lot of negotiating.
"What the court will want is all the claims brought to the bankruptcy court. The court can then tell the sides they need to negotiate. One person may have been abused one time, one person may have been abused 14 years — those cases will have different values," he explained.
Boyd says the insurance company, the Diocese, the claims committee, and the lawyers will be negotiating in what ultimately becomes a global settlement.
"There still will be settlements, there still will be significant settlements but it turns into more of a money transaction," said Boyd.
He adds this move would speed up the legal process.
"On one hand it simplifies the process, but on the other hand our clients didn't want this to be a simplified process: they wanted the truth," said Boyd.
It's not clear when the Buffalo Diocese will file.
A spokesperson for the Buffalo Diocese released a statetement Thursday night, saying:
"This is the financial supplement that the diocese publishes annually, which includes comments from the auditor. There is nothing new here. Bishop Scharffenberger, the apostolic administrator of the diocese, has already indicated that the diocese is considering a Chapter 11 reorganization and, in all likelihood, will go down that route. We will communicate thoroughly about this at the appropriate time. The primary reasons for doing so would include the fair and just restitution for victim survivors, versus a litigation approach that would favor those first in line. It would also enable the diocese to continue uninterrupted the vital work of ministry and outreach that is carried out across Western New York each and every day."