Archdiocese of Puerto Rico Files for Bankruptcy
With an untold number of lawsuits filed by victims of sexual abuse and additional financial issues, Archdioceses are being forced into bankruptcy.
The latest Archdiocese to file for bankruptcy protection is Puerto Rico’s Archdiocese of San Juan. The bankruptcy was filed as a result of having its accounts embargoed.
Originally, the cashed strapped Archdiocese informed its staff that it would not be able to meet payroll and pension obligations, resulting in a lawsuit.
The Archdiocese of San Juan had been impacted financially since Hurricane Maria ravaged the island, causing tens of thousands of Puerto Rican’s from leaving the island and heading to Florida and New York, so student enrollment and membership decreased significantly.
The mistake of the Archdiocese could had been avoided and it is the same mistake countless of my clients have made in the past. This time, it cost the Archdiocese $4 million.
I always advise my clients if facing a lawsuit, there are only three options: negotiate with the creditor, defend yourself in the lawsuit, or file for bankruptcy.
Bankruptcy is always the last step, so if financially it is possible, a negotiation begins with the creditor assuming there aren’t other outstanding debts. When clients tell me they wish to negotiate with the creditor but have other debts they haven’t paid, at that point, nine out of ten times a negotiation is a waste of time.
Defending against the lawsuit is usually a loser since the money is owed and you are contractually obligated to pay it back, which leaves bankruptcy.
Sometimes, if there is a reason that the bankruptcy cannot be filed immediately, the lawsuit has to be defended against to buy more time in order to prepare for the bankruptcy. I prefer not to take this route when possible because this results in charging a client for two cases instead one.
In this case, the Archdiocese already had a judgment levied against it for $4.7 million dating back to last year. Why at that time they did not file for bankruptcy is something I cannot comprehend and that misstep could prevent the Archdiocese from surviving its Chapter 11 bankruptcy filing.
The judgment against the Archdiocese was entered last year, so there was more than enough time for the Archdiocese to file for bankruptcy and protect it’s interests.
Alexander Hernandez, Esq.