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Diocese seeks time to work out settlement with victims

The Diocese of Duluth is seeking an extension to file reorganization plans in its bankruptcy case. (file photo / News Tribune)

The Diocese of Duluth is seeking an extension to file reorganization plans in its bankruptcy case as representatives prepare for more settlement talks with victims of child sexual abuse.

The diocese and a court-appointed creditors committee met for a "productive," two-day mediation session last month in Minneapolis, and they're planning to return to the table for additional discussions during the week of Nov. 14, diocese attorneys said.

"The parties are optimistic that a global resolution will be reached by the close of the November session," attorneys Bruce Anderson and Phillip Kunkel wrote in the motion.

The motion asks U.S. Bankruptcy Judge Robert Kressel to extend a deadline for the diocese to file a proposal to regain control of its finances and repay creditors. That plan is currently due Sept. 1, but attorneys are asking for it to be pushed back to March 17.

The diocese filed for Chapter 11 bankruptcy protection in December in the wake of a $4.9 million verdict in the first case to go to trial under the Minnesota Child Victims Act, which opened a three-year window for victims of decades-old abuse cases to file suit.

The diocese subsequently received 125 claims in the bankruptcy process from alleged abuse victims.

Attorneys for both the diocese and abuse victims have expressed a desire to reach a settlement, as has been the standard in previous diocesan and religious order bankruptcies.

"The debtor has no ulterior motive in seeking an extension of the exclusivity periods," the attorneys wrote. "It continues to pay debts as they come due and is not seeking an extension to pressure creditors. The debtor is working diligently to maximize the value of the estate and requires the extension sought to bring this chapter 11 case to an orderly and efficient conclusion."

Kressel is expected to consider the motion at a hearing next week in Minneapolis.

The judge earlier this month authorized the diocese to pay more than $500,000 in legal fees and expenses.

A diocese official testified at a February hearing that the organization maintained net assets of a little more than $5 million and total liabilities of just over $12 million. The diocese operates with an annual budget of about $3.3 million.