In a letter to the people of the Diocese of San Diego released on Thursday, June 13, Cardinal Robert McElroy announced that the Diocese will be filing for bankruptcy in order to provide just compensation for survivors of sexual abuse and continue the Church’s mission of education, pastoral service and outreach to the poor and the marginalized. The Diocese filed a petition in the United States Bankruptcy Court for the Southern District of California on June 17, 2024.
The following are frequently asked questions and answers about the Diocese’s bankruptcy.
The Diocese is filing under Chapter 11 of the Bankruptcy Code. A Chapter 11 bankruptcy is a voluntary bankruptcy that allows the Diocese to continue its ministries and charitable outreach while seeking a framework for a full and final settlement of sexual abuse claims. The Diocese, schools and parishes will remain open and continue to do the work of the Church. Bankruptcy will provide a pathway for the Diocese to equitably settle the claims filed by survivors of sexual abuse and establish a fund to compensate past victims of sexual abuse who may come forward in the future. During the bankruptcy, the Diocese will continue negotiations with survivors, their attorneys and the Diocese’s insurer to determine a plan for the just and equitable settlement of claims.
The Diocese announced in February 2023 that it was considering bankruptcy and in the following May announced that a decision had been made to do so. Since then, and for the last year, the Diocese has been engaged in mediation talks with attorneys representing abuse survivors, the parishes of the diocese, and with Catholic Mutual, the insurer for the diocese.
No. The parishes, parochial schools and high schools are not filing for bankruptcy.
No. Catholic Charities is not filing bankruptcy.
The ACA seeks donations for specified purposes, specifically Catholic schools, faith formation, Catholic Charities and clergy formation and support. All ACA contributions are maintained by the Diocese in a restricted ACA account to be used only for those purposes. Any funds raised that exceed individual parish goals are remitted by the Diocese to that parish for use by the parish.
Donations and contributions to parishes are for parish purposes. Donations allow parishes to continue their ministry and programs. However, the parishes will likely contribute money or other assets to the bankruptcy plan in order to allow them to receive a release from their own liability for current and unknown claims.
The pension plan is an IRS qualified plan. Pension plans are typically protected and we expect such funds will not be affected by the bankruptcy.
Similarly, the clergy pension plan funds are also typically protected and we expect such funds will be unaffected by the bankruptcy. In some instances, there is an assertion that perpetrators of abuse should not be entitled to benefits under the clergy pension plan; that is an issue that will be addressed as part of the bankruptcy proceedings.
CAPS, the Catholic Account for Parishes and Schools, is a separate entity that holds parish and school deposits and uses those funds to extend loans to parishes and schools for building projects and other purposes. The parish and school monies deposited into CAPS belong to the respective parishes and schools, not the diocese. Parishes and schools, however, will likely contribute money or other assets to the bankruptcy plan in order to receive a release from their own liability and create a fund to compensate survivors for past acts and future claims involving sexual abuse.
Yes. Insurance coverage is available and will contribute to the payment of abuse claims and legal expenses. The amount or percentage of the contribution remains to be determined, but we believe it will be substantial.
Bankruptcy is not expected to affect school tuition or activities.
We expect that attorneys for abuse survivors will assert that certain parish properties should be used to help fund a bankruptcy settlement. We are confident, however, that parish property essential to pastoral purposes will not be affected.
Parishes and schools will likely provide money or other assets to a bankruptcy plan in order to receive a release from their own liability and help create a fund that will compensate survivors for past acts and unknown claims involving sexual abuse.
The amounts will vary and are unknown at this time. Discussions and negotiations will continue in the bankruptcy to determine any such amounts.
How long the bankruptcy case will last depends on many factors that can’t be predicted. Other diocese cases have taken as long as four years. However, based upon the efforts the Diocese has undertaken to mediate with survivors’ counsel over the last year, we hope and expect that the bankruptcy will be resolved more quickly.
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