Franciscan Friars of California, Inc. filed an emergency motion seeking authorization to liquidate approximately $800,000 in bond holdings and access $465,564 in previously segregated funds to prevent the depletion of its operating cash within approximately two months.
The debtor filed the motion on January 19, 2026, in the U.S. Bankruptcy Court for the Northern District of California (Case No. 23-41723 WJL). According to the filing, without court approval to access these resources, the organization projects it will completely exhaust its available cash reserves by early March 2026. The motion states the case is being administered primarily for the benefit of sexual abuse victims.
Financial Position
As of December 31, 2025, the debtor held total cash of $1,244,727.44, but only $850,882.74 is unrestricted and available for operations and reorganization expenses. The remaining $393,844.70 is held in two accounts restricted by donor designations for specific charitable purposes.
According to the debtor's acting Chief Financial Officer's declaration, the organization's monthly income is approximately $10,000, while monthly operating expenses total approximately $63,444. Monthly professional fees for bankruptcy counsel and advisors retained by both the debtor and the Official Committee of Unsecured Creditors average $258,959, resulting in a total monthly cash deficit of $312,403.
The debtor projects its unrestricted funds will decline to $493,630 by February 1, 2026, and will be depleted by early March 2026 at the current rate of expenditure. The motion states that without access to additional resources, the debtor will shut down and be unable to pay reorganization expenses necessary to continue the bankruptcy case.
Securities Portfolio
The debtor maintains a brokerage account at Charles Schwab managed by Trillium Asset Management containing six bonds valued at $800,097.76 as of December 31, 2025. The bonds mature between May 2027 and December 2032. The court previously excused the debtor from posting a bond for this account under Bankruptcy Code Section 345(b) by order entered on March 10, 2024.
According to correspondence from the asset manager included in the filing, the liquidation process would take approximately nine business days from notice to completion, with no commissions or costs associated with the sale. The debtor requests authority to pay up to $100 in fees as a precaution, though none are anticipated.
Segregated Funds Background
The $465,564.07 in segregated funds resulted from a prior court-authorized securities sale. On June 4, 2025, the debtor filed a motion to sell securities donated by an unnamed donor. The court entered an order on June 24, 2025, granting the motion and, at the creditors' committee's request, requiring the proceeds to be placed in a segregated account.
The June 2025 order specified that the funds could be used to fund the bankruptcy case upon written agreement of the debtor and committee or pursuant to court order. The debtor now seeks court authorization to use these funds, stating it will only access the segregated funds after consuming other available resources.
Pending Trust Distribution
The debtor is the primary beneficiary of a trust established following the death of a benefactor in 2025. The debtor received an initial distribution of $1,243,000 in April 2025. According to the filing, the trust administrator initially estimated total distributions of $3.0 to $3.2 million, but a $69,000 IRS late filing penalty and associated legal and accounting fees have reduced the projected remaining distribution to approximately $1.1 to $1.3 million.
The debtor anticipates the remaining distribution might occur in February 2026, but emphasizes it has no control over trust administration and cannot guarantee timing. The motion notes that even if the distribution arrives in February, additional time would be required to obtain court authority to liquidate the assets, potentially pushing availability to March or April 2026.
Professional Fee Burden
The motion notes that reorganization expenses are particularly high during the current period, as attorneys and financial advisors retained by the debtor and creditors' committee work on competing potential plans of reorganization. This is in addition to reorganization expenses incurred throughout the case administration.
A table in the supporting declaration shows bankruptcy professional payments from June 2025 through January 2026 totaling $2,225,930 over seven months, with an eight-month average of $258,873. Monthly payments ranged from $140,568 in November to $316,645 in December, with a December holdback of $154,949 and projected January 2026 payments of $258,959.
Legal Basis for Relief
The debtor seeks authorization under Bankruptcy Code Sections 105(a) and 363(b) and Rule 6004 of the Federal Rules of Bankruptcy Procedure. The motion states that courts require debtors to demonstrate a sound business purpose justifies the use or sale of estate assets outside the ordinary course of business.
The debtor argues that liquidating the securities and accessing the segregated funds constitute sound business judgments necessary to prevent the estate from running out of cash. According to the motion, utilizing the combined approximately $1.3 million in resources would allow the debtor to continue operating and paying reorganization expenses into the start of 2027.
For the securities sale, the debtor proposes to sell the bonds on public exchanges at market rates. The motion argues that established public exchanges represent efficient markets that price in all available information about securities, and that selling at market rates ensures the estate is highly unlikely to sell securities for less than fair market value. The debtor requests authorization to conduct a private sale under Rule 6004(f)(1) by selling at market rates.
Regarding the segregated funds, the motion notes that while Bankruptcy Code Section 363(b) approval is not necessary to pay operating and reorganization expenses, the June 2025 court order requires court approval to use the funds. The order does not specify a required showing, stating only that the funds may be used to fund the case pursuant to court order.
The debtor also requests waiver of the 14-day stay under Rule 6004(h). The motion states that delaying liquidation of the account risks harm to the estate, that creditors have been provided notice and opportunity to object, and that no party will be prejudiced by waiver of the stay.
Case Background
Franciscan Friars of California, Inc. filed for Chapter 11 bankruptcy protection on December 31, 2023. The U.S. Trustee appointed the Official Committee of Unsecured Creditors on January 18, 2024.
The case is pending in the Oakland Division of the U.S. Bankruptcy Court for the Northern District of California. Binder Malter Harris & Rome-Banks LLP represents the debtor in the bankruptcy case.
Next Steps
A hearing on the motion is scheduled for February 11, 2026 at 10:30 a.m. The motion states that if granted, liquidation of the securities and use of the segregated funds would provide approximately $1,265,000 in additional operating cash, which the debtor asserts would significantly enhance its financial foundation and is essential to paying bankruptcy costs and operating expenses.
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