No Halo News · Sourced development
Bankruptcy court rejects Diocese of Burlington’s bid to dismiss creditors’ asset-structure lawsuit; Diocese then seeks to leave Chapter 11
On September 27, the U.S. Bankruptcy Court for the District of Vermont denied the Diocese of Burlington’s motion to dismiss an adversary proceeding brought by the official creditors’ committee and granted only part of separate dismissal requests made by parish defendants. The committee alleges that parishes, schools and parish trusts are effectively parts of the Diocese and that assets were placed beyond abuse claimants’ reach. The ruling allows material portions of those claims to continue; it does not find that assets were improperly transferred or concealed. On September 30, the Diocese filed a separate motion seeking dismissal of its Chapter 11 case, leaving both the adversary dispute and the proposed bankruptcy exit unresolved.
Status matters. This page records a sourced development, not a completed No Halo investigation. An allegation is not a finding. Dismissals, settlements, judgments, corrections and final outcomes remain distinct.
Donor relevance
Why this matters
The ruling keeps alive litigation that could materially change which assets are available to compensate sexual-abuse claimants. The Diocese’s subsequent request to abandon Chapter 11 adds uncertainty over claimant recovery, legal costs, diocesan finances and the treatment of parish and school assets.
Attribution
Who reported or established this
The asset-structure and transfer allegations were made by the Official Committee of Unsecured Creditors representing abuse claimants. Bankruptcy Judge Heather Z. Cooper denied the Diocese’s dismissal request. The Diocese’s September 30 response and bankruptcy-dismissal request were announced by Bishop John McDermott and entered on the bankruptcy docket.
Evidence limits
What remains unverified
No Halo has not established that the Diocese improperly shielded assets, that the challenged trusts legally belong to the Diocese or that the creditors’ committee will prevail. The court’s ruling addressed whether claims could proceed, not their ultimate merits. The request to dismiss the Chapter 11 case also remains subject to court approval.
Right of reply
Organization response
Bishop John McDermott said the Diocese had sold available properties, reduced staffing and expenses, but had incurred more than $2 million in legal and administrative costs without payments reaching claimants. He said continued litigation would consume additional resources, apologized for further distress and stated that the Diocese filed to exit Chapter 11 while hoping for a negotiated resolution.
Classification
How No Halo records this event
Event type: Dismissal. Current state: Pending. No Halo preserves the current procedural state rather than treating every mention as a finding.
Published September 27, 2026 · Last verified October 1, 2026. See an error or a later outcome? Submit a correction or right of reply.