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Diocese paying $20M to abuse victims as part of bankruptcy

For a company that is struggling with debt, bankruptcy may be a viable option in helping it get past such challenges and re-establishing itself in Hackettstown. Yet the fact that some companies are able to file bankruptcy and still remain in operation may cause some to wonder whether said businesses are simply taking advantage of bankruptcy laws to get out from under their debts. What those who think this may not know is that the rules governing a Chapter 11 (which allows businesses to reorganize themselves at the approval of their creditors) are very strict in how a business' debts are discharged, even going so far as to mandate many still be paid. 

This fact is evidenced in a recent Chapter 11 filing initiated by a Catholic diocese in Montana. The diocese is currently facing litigation stemming from over 80 reported cases of sexual abuse that were perpetrated by clergy members primarily between 1950 and 1980. In this case, the victims seeking compensation represent one of the diocese's creditors. The state's federal bankruptcy court recently announced that the diocese must pay out $20 million to these victims. The bulk of the settlement will be generated through the sale of a number of the diocese's properties, while insurance is expected to cover the remaining portion. 

Liabilities related to litigation (as was the case in this example), legal fees and unpaid taxes represent some of the debt categories that may not be subject to discharge in a bankruptcy. Still, a company seeking relief might find a more manageable method of paying these debts through a Chapter 11 bankruptcy. Representatives of companies seeking such protection may first wish to seek the advice and counsel of an experienced bankruptcy attorney. 

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