12 posts categorized "Religion"

Foohey on Black Churches in Bankruptcy

posted by Bob Lawless

Credit Slips blogger Pamela Foohey has a new article on SSRN, "Lender Discrimination, Black Churches, and Bankruptcy." This paper builds on her previous work about churches in bankruptcy to dig into the demographics of which churches end up in bankruptcy court. From her abstract: "Churches with predominately black membership — Black Churches — appeared in chapter 11 more than three times as often as they appear among churches across the country. A conservative estimate of the percentage of Black Churches among religious congregation chapter 11 debtors is 60%. The likely percentage is upward of 75%. Black Churches account for 21% of congregations nationwide."

Foohey discusses the various reasons why black churches would be overrepresented in chapter 11. I suspect there will be a lot of debate about the paper's conclusions, but it is hard to argue with the notion that race matters in bankruptcy as it does across so many parts of life in the U.S. (h/t to Mechele Dickerson's work). Foohey's paper will get bankruptcy experts talking again about why and how it matters, even if there is disagreement on the specifics.

Longest Running Catholic Archdiocese Chapter 11 Case Finally Ends

posted by Pamela Foohey

The Archdiocese of Milwaukee filed its chapter 11 petition on January 4, 2011. Yesterday, four years and ten months later, Bankruptcy Judge Susan Kelley confirmed the dioceses' reorganization plan. During those four plus years, the most contentious issue regarded a $55 million trust fund established rather suspiciously prior to filing to care for a cemetery. The parties were sent to mediation repeatedly, but the cemetery issue seemed to remain the hold up -- until the 7th Circuit ruled that the cemetery trust fund was not shielded from the Code's avoidance provisions by the Religious Freedom Restoration Act. After the 7th Circuit's ruling, the archdiocese revised its plan to distribute $21 million in total to sex abuse claimants. $16 million is coming from that cemetery trust fund. 

In comparison, the archdiocese's initial plan proposed to distribute $4 million in total to these claimants. The $21 million primarily will be split among 355 people. Though it is difficult to compare settlement amounts across diocese chapter 11 cases because of unknowns about abuse severity, state laws that apply to the underlying claims, and available insurance monies and other assets, the $21 million still makes Milwaukee's settlement one of the smallest based on the number of people to receive compensation.

Continue reading "Longest Running Catholic Archdiocese Chapter 11 Case Finally Ends" »

Notifying Potential Claimants in Diocese Chapter 11 Cases

posted by Pamela Foohey

Since 2004, 12 Catholic dioceses have filed under Chapter 11. The latest case is that of the Archdiocese of St. Paul and Minneapolis, which filed in January 2015. The claims bar date is set for August 3. How should the Archdiocese go about notifying potential claimants -- clergy abuse survivors who have not yet come forward and who may feel ashamed and alone -- that they need to file a claim by the bar date?

Yesterday the official unsecured creditors' committee (which is comprised of five clergy abuse survivors) filed a motion requesting that the bankruptcy court order all 187 parishes to play a 7 minute video in which three abuse claimants explain the necessity of filing a claim by the bar date and talk about, from their unique perspectives, why coming forward, however hard it may be, is important, both for survivors and for the church. (The motion also requests that parishes publish the video on their websites.)

The video is hard to watch. The motion states that the committee tried to come to an agreement with the debtor and the parishes about the video. The motion identifies "cooperation clauses" in insurance contracts that require insured parties (the parishes) to limit the liability of the insurers to the greatest extent possible as the main problem that stalled negotiations. It also is understandable that parishes might not want to show the video or put it on their website simply because it is hard to watch. But ultimately I think that the video is a very worthwhile idea, as a legal and community-building matter.

Continue reading "Notifying Potential Claimants in Diocese Chapter 11 Cases" »

Archdiocese's Potential Fraudulent Transfer Not Protected by RFRA, First Amendment

posted by Pamela Foohey

The Archdiocese of Milwaukee’s Chapter 11 case remains the longest running Chapter 11 case filed by an Archdiocese or other Catholic entity. It filed in January 2011, and because of religious-based objections to the application of the Code's fraudulent and preferential transfer provisions, Bankruptcy Judge Susan Kelley has declined to rule on any reorganization plan until the objections are settled.

The main hang-up is an April 2007 pre-petition transfer of $55 million from the Archdiocese’s general accounts to a trust earmarked for maintaining cemeteries--generally known as the "Cemetery Trust Fund." Post-filing, the Archbishop, acting in his role as the trustee of the Cemetery Trust Fund, sought a declaratory judgment from the bankruptcy court that the $55 million would never be part of the Archdiocese's bankruptcy because the First Amendment and/or the Religious Freedom Restoration Act (RFRA) barred the application of the Code's avoidance provisions. The action was defended by the Unsecured Creditors' Committee -- because the DIP was just a tad conflicted given that it acts through its sole corporate member, the Archbishop.

The question made its way up to the 7th Circuit, which issued a long awaited opinion today. The rulings are: (1) RFRA is not applicable because it only applies to suits in which the government is a party, and the Creditors' Committee is not the government; and (2) the Archbishop's free exercise rights are not violated by application of the Code's generally neutral principles that are narrowly tailored to support a compelling government interest in protecting creditors. In short, the Archdiocese decided to file under Chapter 11 and now it cannot seek a religious exemption for purported fraud.

Continue reading "Archdiocese's Potential Fraudulent Transfer Not Protected by RFRA, First Amendment" »

Some Bibles Are More Exemptable Than Others

posted by Jason Kilborn

Holy BibleI wonder how many Bankruptcy professors have posed a hypothetical about the exemption of a rare Bible worth lots of money? Well, a federal District Court in Illinois had to answer the question for real.

The Illinois personal property exemption statute includes the debtor's Bible. A debtor in Southern Illinois asserted this exemption in a rare, first-edition Mormon Bible that she had acquired (for free) from her local library. Apparently, the library director had not been paying attention, as the 1830 Bible was appraised at at least $10,000.

Amusingly, the debtor's lawyer described this item of property on Schedule B as "old Mormon bible," further observing that "debtor has been told that there is a 100% exemption for bibles but valuable bibles may or may not be covered under such exemption" (!). The trustee accepted this open invitation and objected that the statute was never intended to apply to a Bible of such value, and the bankruptcy court agreed. The District Court reversed.  Responding to the standard law professor questions, the court noted that the word "necessary" in the statute modified only the first word, "wearing apparel," not the other words ("one does not need a bible, school books, or family pictures to survive"), and unlike other property in the statute, bibles are not subject to an explicit value restriction. QED.

Sometimes life does imitate fiction.

Holy Bible image courtesy of Shutterstock

Now Might Be the Time for the Longest Pending Catholic Diocese Chapter 11 Case to Settle

posted by Pamela Foohey

The Archdiocese of Milwaukee is one of 11 dioceses (plus 2 other Catholic-affiliated religious orders) to file under Chapter 11 -- and it likely will not be the last. All of the cases were filed in hopes of achieving global settlements of sexual abuse claims. The Milwaukee Archdiocese filed over 3.5 years ago, in January 2011, making it the longest running Diocese case. 6 of the 7 other dioceses that filed before it confirmed reorganization plans in an average of about 2 years after filing. The shortest time to confirmation was 10 months, while the longest was 2.75 years. The other diocese, San Diego, negotiated a settlement, via mediation, in approximately 9 months.

The Milwaukee Archdiocese and its creditors (predominately abuse claimants) have spent the last 3.5 years, despite a trip to mediation in 2012, primarily fighting over a $55 million trust fund established to pay for upkeep of the diocese's cemetery. Without the $55 million, abuse claimants are likely to receive no more than $4 million. The $4 million figure would be smallest settlement paid to abuse claimants in any of the Catholic Church bankruptcies so far. The cemetery trust issue is pending before the 7th Circuit. Meanwhile, attorneys' and other professionals' fees are rising, leading Judge Kelley to order the parties back to mediation, starting tomorrow.

Continue reading "Now Might Be the Time for the Longest Pending Catholic Diocese Chapter 11 Case to Settle" »

Faith-Based Markets

posted by Adam Levitin

Paul Krugman has a column today about the blind, fundamentalist faith in efficient markets.  This is a phenomenon that Stephen Lubben and I have been discussing recently (did Krugman just preempt our paper idea?), as we've both encountered it in the financial regulatory policy debate: 

  • The Chapter 14 proposal that would resolve large financial institutions in bankruptcy takes it as a matter of faith that there would be sufficient private DIP financing available to resolve, say, JPMorgan Chase. I don't know how much would be needed, but it would be a multiple of the largest private DIP loans to date:  $10B for Energy Future Holding and $8B for Lyondell Chemical.  Where would the, perhaps $100B needed for a megabank come from?  Well, not from that megabank...  But don't worry, the market will provide.
  • Housing finance reform proposals that would either total privatize the housing market (the House Republican solution) or privatize 10% of the market (the Johnson-Crapo bill in the Senate).  We could have a completely private housing finance system.  But don't be surprised when home prices drop precipitously.  There just isn't enough private risk-capital willing to assume credit risk on housing to finance the whole market. It's not clear to me that there's enough private risk-capital willing to assume the credit risk on 10% of the market, and if there isn't it is going to result in at least a 50 basis point increase across the board, and much higher price increases for riskier borrower.  But don't worry about these details.  The market will provide. 

So here's the inconvenient paradox of market fundamentalism:  the idea that the free market can be directed. Either the market is free or it will follow direction, but it's not going to do both. Markets do what markets want.  

Continue reading "Faith-Based Markets" »

Attorneys' Advice on Representing Religious Organizations in Chapter 11

posted by Pamela Foohey

As part of my study of religious organizations' Chapter 11 cases, I interviewed attorneys who represented a variety of churches and other faith-based institutions in their reorganization cases. Some of my findings are presented in this new paper. In short, the interviews confirm my previous conclusion based on an analysis of documents filed in religious organizations' Chapter 11 cases: reorganization oftentimes can be beneficial for these debtors.

Of the 52 Chapter 11 cases discussed by attorneys, 23% ended in a confirmed reorganization plan, and another 40% resulted in an agreement between the debtor and its creditors. When I interviewed the attorneys, 71% of their clients were still operating, though a couple churches were in the midst of foreclosure. When asked what "special considerations" other attorneys should be aware of in future representations, attorneys focused on six issues:

Continue reading "Attorneys' Advice on Representing Religious Organizations in Chapter 11" »

Usury Takes a Bite Out of the Poor

posted by Nathalie Martin

Those of us struggling with the issues raised by payday and title loans are consistently told to take morality out of the equation when considering these loans. Thus, it was refreshing to hear a recent presentation by Professor Alex Mikulich of the Jesuit Social Research Institute at Loyola New Orleans entitled “From the Peril of Predatory Lending to the Hope of Economic Justice: A Religious Social Ethical Perspective.” Rather than avoiding morality questions, Professor Mikulich focused exclusively on them in his eye-opening presentation at a recent Family Impact Seminar. He noted that the loans create many unjust results, and then explained that the literal translation of the word usury in Hebrew is to “take a bite out" of the poor.   He distinguished usury from mere  “interest,” which Professor Mikulich defines as part of a mutually beneficial relationship that is good for the community as a whole.

Continue reading "Usury Takes a Bite Out of the Poor" »

Cash as Social Infrastructure

posted by Bill Maurer & Stephen Rea

Sticker in San Francisco: "Of course it's cash-only, it's the Mission."

Overheard: "Oooh, yeah, no, we don't take cards. Because the coffee is, like, local?" (both items courtesy Lana Swartz)

The word “cash” derives from Latinate words referring to “a chest or box for storing money,” not the money itself. The term originally meant the practices of storing, and the objects used to store items of value – not just money -- as well as the act of going to those storage devices to receive money (to “cash” a bill of exchange,, meant to go to the specific box where the money was). Cash as we know it today is more than a store of value and a medium of exchange; it has symbolic, pragmatic and artistic functions. In the US, even before Durbin, small merchants placed an extra surcharge on credit or offered discounts if customers used cash. Research being conducted at the Institute for Money, Technology and Financial Inclusion (IMTFI) is bringing to light a host of social, ritual and religious uses of cash and coin beyond their economic functions. What's their relationship to, say, mobile money? For us, they are design challenges more than anything else (see, e.g., the Royal Canadian Mint's MintChip, or discussions among developers about Google Wallet). Building an infrastructure for digital payments, especially in places that have been cash-only, entails some connection to the existing social infrastructures of cash.

Continue reading "Cash as Social Infrastructure" »

Credit for Parenthood (in the Wall Street Journal)

posted by Melissa Jacoby

Wall Street Journal Reporter Jessica Silver-Greenberg casts a spotlight on the market for fertility treatment loans - including loans that enable the purchase of other women's eggs  - in the article "In Vitro a Fertile Niche for Lenders."  (subscription required). Perhaps this will prompt some coverage of the adoption loan market, which also has very interesting not-for-profit lending options; the direct financial price of the credit may be low but some complicated strings are attached. My earlier efforts to broadly evaluate the impact of loans in these markets are here and here

Robosigning and Evidence

posted by Adam Levitin

The robosigning issue brought to mind a Talmudic evidentiary rule that declares the testimony of certain types of people inadmissible:  

These are they who are ineligible (as witnesses): a dice-player, a usurer, pigeon-flyers, traffickers in Seventh Year produce, and slaves. This is the general rule; any evidence that a woman is not eligible to bring, these are not eligible to bring.  

Mishnah Rosh ha-Shanah 1:8.  

This is hardly the Federal Rules of Evidence, but I just thought it interesting.  

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