Vermont diocese seeks dismissal of years-old bankruptcy case

The Diocese of Burlington, Vermont, asked a federal bankruptcy court Sept. 30 to dismiss its two-year-old bankruptcy case, citing rising legal costs and delays in reaching a settlement with clergy abuse survivors.

As Zeale News previously reported, the diocese filed for bankruptcy protection in September 2024, citing depleted assets and limited insurance coverage amid lawsuits alleging decades-old abuse. The case involves more than 100 people with clergy sexual abuse claims, according to VTDigger. 

In a Sept. 30 statement, Burlington Bishop John McDermott explained the decision to end Chapter 11, a bankruptcy process allowing the diocese to reorganize its finances and continue operating. 

“Unfortunately, after two years into this reorganization process we have not made the progress I had hoped for, and we appear far away from a resolution that will compensate the claimants and allow the Diocese to rebuild and move forward into the future,” Bishop McDermott wrote. “In fact, our legal and administrative expenses are well more than two million dollars, and not one dollar of these funds has been given to a single claimant.”

He explained that Chapter 11 requires the diocese to cover both its own legal expenses and the costs of the legal and professional firms representing the creditors committee and claimants.

As Zeale News previously reported, the committee representing abuse survivors is seeking access to an estimated $500 million in parish-related assets to help compensate claimants. Those assets were transferred into individual trusts in 2006, and the committee has argued they, along with the diocese’s own assets, should be included in the bankruptcy case. 

The committee said it would oppose dismissal, disputing the diocese’s explanation for the mounting legal costs.

“The diocese is not being forced to litigate,” committee counsel Brittany Michael said in a statement, according to VTDigger. “It is choosing to litigate every issue the hard way and then blaming the bill on everyone else.”

A judge has scheduled a Dec. 8 hearing on the dismissal request, the outlet reported. If approved, dismissal would allow abuse lawsuits paused by the bankruptcy filing to resume.

Before seeking dismissal, the diocese proposed a $29.4 million settlement following two days of mediation, according to VTDigger. The outlet noted diocesan attorneys said the committee rejected the offer.

“To all the claimants I apologize if this action causes you further distress,” Bishop McDermott wrote. “I believe the Diocese has made a good faith effort to resolve this process in a timely and just manner. Unfortunately, our best offer was not accepted."