Facing a dramatic decline in its property values, The Church at South Las Vegas stopped paying its mortgage in May and filed for Chapter 11 protection in July after its lender filed suit. The church owes approximately $7.6 million on property now worth only $2.4 million.

Pastor Benny Perez told media that the default was a strategic move in order to preserve member donations—totaling almost $650,000 according to court filings—given to expand church facilities. The church has the money to make its monthly payments (it has about $1 million in reserve funds) but believes it is bad stewardship to have tithes keep going into a "black hole."

"People give to vision," Perez told CBS 8 News. "They don't give to debt."

But others doubt the wisdom of a church taking such action.

Although bankruptcy can be a tool to more effectively allocate resources, the president of the Association of Christian Economists thinks churches need to remember the way their actions affect others.

"It does strike me that there is a witness in a church doing everything it can to meet its obligations," said John Lunn, an economics professor at Hope College. "That doesn't mean you can never file bankruptcy. But as Christians, we have an obligation to behave better than the law."

Indications are that many have fallen short. Pointing to 200 church foreclosures over the past three years—compared to virtually none from 1996 to 2006—Maryland-based business consultant Mike Metzger said too many Christians talk in religious clichés instead of facing reality.

"A lot of faith communities are like homes," said Metzger. "They have balloon payments, and when due they either beg, pass the plate, lay off staff, or file bankruptcy."

Experts disagree over the extent of future financial difficulties.

"My guess is we're headed for a double-dip recession and we will see more," said Gary Moore, founder of the Financial Seminary. "There are too many [church buildings] in America. We have an 'edifice' complex."

However, Evangelical Christian Credit Union president Mark Holbrook thinks the bankruptcy trend is ebbing. The delinquency rate in the group's $3 billion portfolio has dropped from 7.4 percent one year ago to 5.5 percent today.

"We've had the first foreclosures in our history," he said of the past three years. "Some churches blow away—attendance and giving drops off. We will still see some lingering effects … but it will only be a few."

America's Christian Credit Union has also seen a slight decline this year in delinquencies in its $390 million church loan portfolio.

"It gives us a little bit of hope that the economy is starting to stabilize and churches have made necessary cuts and are able to stabilize too," said president Mendell Thompson.

Many current problems have roots in the prosperity of the late 1990s, which touched off an $80 million boom in church building. The most notable victim of overreaching: the Crystal Cathedral, which filed for Chapter 11 last year under the weight of $48 million in debts.

"It wasn't the bad times that got us; it was the good," said Moore, a Crystal Cathedral board member during that era. "We over-built."

Despite the downturn that has led churches to take a step once unheard of, Dan Busby, president of the Evangelical Council for Financial Accountability, calls Crystal Cathedral one of the "outliers" that don't represent most churches.

"The good news is that most churches and parachurch organizations have thoughtfully adjusted their budgets and made tough decisions," he said. "We're not through this yet, though. Leaders have to step up with imagination and creativity to address these situations."

Related Elsewhere:

Other Christianity Today articles on debt and money management include:

Dave Ramsey Goes Beyond Credit Card Shredding | More congregations than ever are hosting Ramsey's Financial Peace University. Now he's looking at their budgets, too. (August 19, 2011)
What's Wrong with Credit Card Debt?| Observers weigh in on debt's indication of lack of faith, danger, and potential immorality. (May 25, 2011)
Money & Power| Money is a master calling for complete obedience. (April 24, 2007)

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