Boston Bank Questions Church’s Eligibility to File for Bankruptcy
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Boston Bank Questions Church’s Eligibility to File for Bankruptcy

April 16, 2012


A key creditor in the bankruptcy filing of a historic Boston church has raised objections about the church’s eligibility for bankruptcy, and sources suggest that this challenge may throw a wrench in the church’s debt relief plans.

This week, OneUnited Bank submitted papers to a bankruptcy court that claim the Chapter 11 bankruptcy filing of Charles Street AME Church, a historic venue in Roxbury, Massachusetts, should be voided because the church did not have the right to seek bankruptcy protection.

According to a recent report from the Boston Herald, the church filed for Chapter 11 bankruptcy in order to avoid foreclosure, but OneUnited Bank, the church’s largest creditor, claims that the church is being disingenuous when it claims poverty.

Sources say that the church allegedly combines its assets with the First District of the African Methodist Episcopal church, which has more than $500 million in assets.

In the opinion of OneUnited Bank, that lofty sum is “more than enough” to cover the $4.7 million debt that the Charles Street AME Church owes to the frustrated bank.

In response to this claim, though, the church claims that it is a “Massachusetts nonprofit that’s been separate from the First District for (nearly) 200 years.”

Nevertheless, the bank maintains its position, and it also claims that the church may not even be a debtor under bankruptcy law because of the unique nature of the church’s financial holdings.

In the bank’s court papers, it claims that "all of the property of (Charles Street) is held in trust for the greater AME Church. Of course, this raises the question of whether (Charles Street) is a proper ‘debtor’ that’s even entitled to bankruptcy protection."

In the face of this challenge by the church’s primary creditor, the bankruptcy court will have to determine which party is telling the truth in order to gauge whether Charles Street is eligible for bankruptcy.

The struggling church filed Chapter 11 last month in order to prevent OneUnited Bank from foreclosing on the property. The bank had sued the church two years ago after the church was unable to repay a $3.6 million construction loan.

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