27 February 2013

"Bankrupting the Faith"

If you've followed this blog for a couple of years you might remember my frequent posting about the bankruptcy of the Crystal Cathedral, which, in spite of its name, was a Protestant church affiliated with the Reformed Church in America. (See herehere, and here for a representative set about the bankruptcy process.)

I've just now finished reading a paper titled Bankrupting the Faith by Pamela Foohey (abstract here). Visiting Professor Foohey's paper is an empirical study of all Chapter 11 bankruptcies of "religious organizations" for the five-year period 2006-2011. An impressive amount of analysis and number crunching.

In short, and a bit of a surprise to me, was the relatively high degree of success (measured primarily in terms of confirmed plans of reorganization) that such Chapter 11s enjoyed. Apart from Roman Catholic dioceses that filed to centralize abuse litigation, most religious organizations filed because of the recent extended economic downturn or because of what can often charitably be described as "leadership failure." (See some of my posts here and here about that aspect of the Crystal Cathedral bankruptcy.) In either situation, however, reorganization was possible. The primary reason for success seemed to be correlated to their low debt-to-asset ratios and the fact that the principal asset of religious organizations is real estate.

I will be interviewing Pamela next week for a podcast for my part-time gig at the American Bankruptcy Institute. Stay tuned and I'll let folks know where they can listen to it.

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