Church Bankruptcy Increases
by Ashley High

Recently in Maryland, an auctioneer sold a church complete with its rectory, bell tower, pews, and stained glass windows to the highest (and only) bidder – a representative of the bank that had just foreclosed on the church. During these hard economic times, even churches are having trouble paying their bills and loans.

 

For one reason, in the 1990s, a church expansion boom began as mega-churches added gyms, coffee shops, education wings, and bookstores to their buildings. Spending on church construction increased from $3.8 billion in 1997 to $6.8 billion in 2007 according to the U.S. Census. However, now many church members are losing their jobs and their savings. Michael Tangen, the executive vice president of American Investors Group Inc., a church lender in Minnesota, said “There have been too many churches with a ‘build it and they will come’ attitude. They had glory in their eyes that wasn’t backed up with adequate business plans and cash flow.”

 

Church giving is down as much as 15% in some areas. Historically, lenders thought of churches as good credit risks because church giving remained consistent even in hard times and churches felt morally obligated to repay their debts. However, now some lenders no longer consider churches to be a safe investment.

 

“We are seeing more stress in churches than we have in modern history,” said Mark G. Holbrook, president and chief executive of the Evangelical Christian Credit Union that specializes in lending to churches. Mr. Holbrook said that their organization has already foreclosed on seven churches this year, and expects to foreclose on two more before year end. In the organization’s 45 year history, they have only foreclosed on two churches before this year. Another organization, Strongtower Financial, reported that two of its church borrowers are in default, compared with one church in the last 15 years. Finally, dozens of churches are delinquent in their loan payments, according to a survey of court records around the nation.

 

Information taken from: Suzanne Sataline. “In Hard Times, Houses of God Turn to Chapter 11 in Book of Bankruptcy.” The Wall Street Journal. www.online.wsj.com


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