Vermont Bankruptcy Court Clears Path for Survivors to Target Diocese Assets

The U.S. Bankruptcy Court for the District of Vermont granted the Committee of Unsecured Creditors standing to initiate legal action after the Diocese repeatedly declined to pursue claims against its own parishes and schools. Judge Heather Z. Cooper ruled that the Committee’s arguments were colorable and that the Diocese had failed to justify its refusal to seek funds necessary to satisfy its financial obligations.

At the heart of the dispute are the Parish Trusts established in 2006, which hold property valued at approximately $405 million. The lawsuit alleges these assets were transferred for a nominal fee of one dollar while the Diocese retained effective control. The Committee, represented by Pachulski Stang Ziehl & Jones, now seeks to invalidate these transfers as fraudulent and recover the holdings for the estate. Brittney Michael, counsel for the Committee, stated that the organization intends to prove that the parishes are not independent legal entities but rather operating divisions designed to shield wealth from those harmed by the institution. The Diocese and Bishop John J. McDermott have yet to file formal responses to the allegations.