Churches Do File for Bankruptcy

While the news that Maryland State Sen. C. Anthony Muse’s (D-Prince George’s) church filed for bankruptcy may surprise some, it’s not unusual, as church bankruptcies are becoming more common across the country.

The Ark of Safety Christian Church in Upper Marlboro, which Muse leads as a senior pastor, filed for Chapter 11 bankruptcy protection earlier this month. Muse told the Washington Post that the church struggled to make mortgage payments and pay other debts. “Middle-class homeowners and middle-class churches are still struggling to climb out of the recession,” Muse said. “Our members are middle class and have many needs. Their struggle has strained the church’s resources.”

The Ark story is an example of bankruptcies that are starting to become more popular among churches.  A story done last year by the Orlando Sentinel reported that “churches often operate without large cash reserves.” The story said that some churches got caught up in the housing and building book that occurred during the 1990s and early 2000s, saying construction and expansion more than tripled, going from $2.8 billion in 1993 to $8.6 billion in 2003. According to the Sentinel report, from January 2010 to January 2011, an estimated 100 churches filed for bankruptcy, including the oldest black church in DeKalb County, Ga., and a 10,000-member Crystal Cathedral church in California.

According to the Washington Post article, the Ark’s bankruptcy filing lists nearly $1.8 million in debts owed to the church’s largest 20 creditors.  Under Chapter 11 bankruptcy, a debtor remains in control of its business with oversight from the court and faces a restructuring. Muse hopes the church will be able to save itself through reducing its debt. An individual could do something similar—Chapter 13 bankruptcy is an option for people who need a financial reorganization. Some items like cars or homes can be saved under a Chapter 13 bankruptcy, in which a repayment plan is in place. Bankruptcy also allows for the discharge of unsecured debt, like credit card debt or medical bills, if money is still owed following the terms of repayment plan.

Talk to an attorney about what Chapter 13 bankruptcy can do for you. If you’re facing financial obstacles, call us for a free consultation.

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