Rockville diocese’s case stays open; court sets deadline to file plan

By Sarah Lizee

Olympia, Wash., July 19 – The court overseeing Roman Catholic Diocese of Rockville Centre, New York’s Chapter 11 bankruptcy case denied a motion from the official committee of unsecured creditors that sought to dismiss the case, according to an order filed Tuesday.

As previously reported, the committee argued that at over two and a half years in Chapter 11, the diocese has no likelihood of rehabilitation.

The U.S. Bankruptcy Court for the Southern District of New York did not agree, noting that some cases may remain open for years before a viable path to reorganization is established.

“Finding that cause for dismissal exists simply because two or three years have elapsed in such a case could undo years of progress toward rehabilitation,” judge Martin Glenn said in the order.

However, Glenn said time is “beginning to weigh against the debtor,” and that none of the dynamics in the diocese’s case explain why it is approaching three years with no proposal of a confirmable plan.

The diocese had filed a plan earlier this year, but it was met with opposition from the creditor body, making it unconfirmable.

The debtor now contends that it is possible that it will propose an amended plan with increased third-party funding that will garner enough creditor support.

The diocese has said that since the committee filed its motion to dismiss, it has negotiated with third parties to increase plan contributions to $40 million from $11 million.

The committee contends that these contributions are still inadequate, due to alleged decreases in value of other estates assets, but the court said these increases are indicative of meaningful progress and may not necessarily be the best and final offer.

Importantly, the dismissal motion was denied without prejudice, as the court concluded that the committee’s arguments may be better pressed after the debtor is given an opportunity to file an amended plan.

The court ordered the diocese to file an amended plan of reorganization and disclosure statement, or, at a minimum, a term sheet for a plan that is supported by both the debtor and the committee, by Oct. 31.

The Rockville Centre, N.Y.-based diocese filed bankruptcy on Oct. 1, 2020 under Chapter 11 case number 20-12345.

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