Charities Also Filing For Bankruptcy

February 20, 2009 8:33 a.m. EST

Washington, D.C (AHN) - Aside from Wall Street companies and other business enterprises, a rise in bankruptcy filings among nonprofit groups has been observed in the U.S. Included in those filing for Chapter 11 are charitable organizations.

There is no data on the number of nonprofit groups that have filed for bankruptcy, although experts said Chapter 11 filings are becoming more common as the non-profits are under pressure from donors to run like a business enterprise.

The charity Glass Youth and Family Services in Los Angeles filed for bankruptcy Tuesday as the organization grappled with dipping state reimbursements, spiraling costs of operations and declining donations. Teresa DeCresenzo, executive director of Glass, which provides social services to gays and lesbians, said the organization tried everything to prevent bankruptcy, but it failed.

For the past six months, charities that have filed for Chapter 11 include a rape crisis group in Maine, a group that assists low-income housing dwellers in Massachusetts, and a retirement community in Pennsylvania.

Among the nonprofit groups, those in the performing arts sector are hit hard first as donors give higher priority to charities that provide basic services, and consumers place less of a premium on entertainment and the performing arts.

For faith-based organizations like the Catholic Charities of various archdioceses and the Salvation Army, measures taken by these organizations to survive the recession includes hiring freezes, postponing launching new programs and asking their mother organizations, such as religious orders, to increase funding.