A U.S. bankruptcy judge has told the Vermont Roman Catholic Diocese she might dismiss the church’s bid to reorganize its depleting finances if a viable plan isn’t submitted soon.
The state’s largest religious denomination filed for Chapter 11 protection in the fall of 2024 after a past series of priest misconduct settlements reduced its claimed assets by half, to a reported $35 million. Since then, the diocese has paid more than $2 million of its remaining money in fees for its attorneys and for counsel to represent officially recognized creditors, as required by federal law.
To raise funds, the diocese is selling its South Burlington headquarters to Northeast Territories, a Vermont limited liability company, for $3.13 million, court records show. As a result, Bishop John McDermott is set to move his chancery offices to Saint Michael’s College in Colchester, according to Vermont Catholic Magazine.
Lawyers for the church and creditors reported little other progress Tuesday at a court hearing in Burlington. But in a separate order, Judge Heather Cooper gave the parties until fall to agree on a plan or face the end of the process.
In September, the court will hold another hearing “at which the group will discuss whether this Chapter 11 case remains viable” and “whether trust in current management remains,” Cooper wrote.
“The court anticipates a proposed plan, conversion, or dismissal as the case approaches the two-year anniversary of filing,” she added.
Ending the proceedings without a proposal would further endanger the diocese’s finances by reviving a set of abuse lawsuits placed on hold by the bankruptcy filing.
The diocese — one of 44 U.S. Catholic entities to seek Chapter 11 protection — has paid $34.5 million to settle 67 clergy misconduct claims, according to records, yet still faces 119 more dating as far back as 1950.
Although the church initially reported $35 million in assets tied to its South Burlington headquarters and state-level holdings, creditors — who include more than 100 abuse claimants — are seeking records on all local properties the diocese oversees. The latter group specifically wants to learn about nearly 70 parishes with an estimated collective worth of $500 million that were placed in trusts in 2006.
As lawyers argue whether the case involves just state or also local assets, the judge is aiming to save money for abuse claimants seeking compensation.
“My concern is that I don’t want it all going to the professionals,” Cooper said at an earlier hearing. “I do think that the survivors probably would like to have something left over at the end of the day.”
