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Authors

George B. Reese

Abstract

During times of economic turmoil, certain private charitable institutions operating in urban areas often face financial problems. In the past, these institutions - hospitals, community service centers, and the like - were partially reimbursed by government welfare funds for their "public services" expenditures. But as the pressures on municipal budgets have increased, these reimbursements become delayed, and sometimes uncertain. A charitable corporation contemplating a petition in bankruptcy might wish to seek cy pres relief from the bankruptcy court. Cy pres, a common feature of state law, provides that a gift in trust or otherwise which is determined to have been made pursuant to a general charitable intent can be judicially modified to carry out, as nearly as possible, the donor's presumed wishes. However, the dearth of case law involving such bankruptcies has left unclear whether the two proceedings could be combined-that is, whether a bankruptcy court, as part of a plan of reorganizations, could modify restrictions on charitable endowments in a fashion similar to state cy pres relief. This Article will examine the nature of the cy pres doctrine and the jurisdiction of the bankruptcy court to determine whether the court may grant such relief to financially distressed charities.

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