Just as nonprofit organizations can present interesting issues in governance and complex problems of accounting, they also pose specific bankruptcy concerns. Still, some general comments can help guide nonprofit leaders and their agents when it comes to pre-bankruptcy planning and knowing what to expect as a bankruptcy debtor. While state laws still play a major role (including defining the organization’s property interests for purposes of the bankruptcy), bankruptcy is governed by its own set of federal laws and some complex rules, so any entity considering filing for bankruptcy would do well to consult an experienced bankruptcy attorney to advise as to the particulars of both state and federal law.

Today, November 4, 2020, the Supreme Court is hearing oral arguments from foster parents and Catholic Social Services (“CSS”) and the City of Philadelphia (the “City”) regarding a conflict between the City’s foster care regulations and CSS’s sincerely religious beliefs. As a person of faith or leader of a faith-based organization, what do you need to know about this case?

Does your website feature a “donate” button for online donations? Does your organization receive contributions from donors? Are you thinking of hosting an annual gala or walkathon? Do you send requests for donations via U.S. mail? If you answered “yes” to any of these questions, your organization must assess whether it is subject to charitable solicitation registration laws and regulations in one or more states.

Both religious liberty advocates and skeptics agree that the protection of religious liberty in the First Amendment does not mean that the government cannot impose any restrictions on the practice of religion. But, after 243 years of discussion, the debate on where to draw the line between free exercise and government regulation continues with as much energy as ever.

Severe financial distress has become part of the landscape for faith-based nonprofits in recent years. Nonprofit leaders, whether they are potential bankruptcy filers or bankruptcy creditors, should be familiar with basic concepts of bankruptcy and its impact on nonprofits.