The state’s Catholic diocese wants to abandon the Chapter 11 bankruptcy process it initiated two years ago, saying settlement talks with sex-abuse survivors have hopelessly stalled.
The extraordinary request, which still requires a judge’s approval, comes as the court has been inching closer to ruling on a key sticking point in those negotiations: whether some portion of more than $400 million in assets that the diocese transferred to local parishes in recent decades should be made available to people who say they were sexually abused by Vermont priests.
The answer to that question could be enormously consequential to sex-abuse claimants’ payouts and to the future of the Catholic Church in Vermont. Church officials have acknowledged that they moved assets into separate parish trust accounts in an effort to shield local churches from sex-abuse litigation. But they maintain that the transfers were legitimate, and that the bankruptcy process should be restricted to the more limited pool of diocesan assets.
Bankruptcy judge Heather Cooper on Sunday ruled that the committee representing sex-abuse claimants should be allowed to press its case that the parish resources are part of the diocesan estate.
The decision set the stage for a high-stakes legal proceeding.
This week, however, attorneys for the Roman Catholic Diocese of Burlington met with claimants’ attorneys and delivered what the diocese described as its best and final settlement proposal.
Under the proposal, the diocese would pay out just over $29 million, or around $247,000 per sex-abuse claimant, according to court filings. The settlement would be funded in part by millions raised in recent and pending sales of diocesan property, including its eldercare homes and the campus of Rice Memorial High School.
The committee representing survivors rejected the deal, which led Bishop John McDermott to conclude that the bankruptcy process was no longer productive. In a letter to parishioners, the bishop said he was “extremely disappointed” by the bankruptcy process and asserted that mounting legal bills, which have already topped $2 million, are unsustainable.
“I believe the Diocese has made a good faith effort to resolve this process in a timely and just manner,” he wrote. “Unfortunately, our best offer was not accepted.”
Attorneys for sex-abuse claimants are vowing to oppose the diocese’s request. In a statement, committee chair and claimant Daniel Stack suggested that the diocese wants to back out of bankruptcy because the judge dealt a blow to its legal strategy. He described the request as a “second attempt to avoid accountability.”
Stack was one of several survivors whose lawsuit against the church was curtailed by the diocese’s decision to file for bankruptcy in 2024.
Dismissal of the case would restore the litigation free-for-all that preceded it, fueled by a state law that lifted the statute of limitations for sex-abuse claims.
McDermott had pitched bankruptcy as the most equitable way to handle the flood of lawsuits and preserve the diocese’s ability to carry out its religious mission. Survivor groups criticized the maneuver at the time.
Two years and $2 million later, the sides’ stances have flipped.
