One Nonprofit’s Demise: Sad, But Well Organized Under Chapter 11

January 5, 2017; Arizona Republic

With the help of some local foundations, the 45-year-old Phoenix-based Tumbleweed Center for Youth Development made the decision to file for bankruptcy in December and is transferring all of its programs to other nonprofits over the next three months even as it liquidates its assets to pay existing debts.

The organization, as this article describes it, was having severe cash flow difficulties and was in what became insurmountable debt. The recent resignations in September and November of both the CEO and CFO followed a resignation in March of a former CFO. New interim leadership determined that the organization was “grossly overspending.”

A handful of private foundations donated hundreds of thousands of dollars as the bankruptcy was declared to allow for an orderly transition even while programs continued to function.

Tumbleweed was founded in 1972 and serves hundreds of homeless people ages 12-25 each year with resource centers, emergency and transitional housing, life counseling and other programs. It also provides services for youth refugees and unaccompanied minors from outside the U.S.

This situation stands in stark contrast to other sudden closings where, as one community clinic’s closing was described, clients were essentially abandoned along with their records in some cases. Filing for bankruptcy and being open with local funders and partners can help to ease such transitions.

Here is more about filing Chapter 11 as a nonprofit. —Ruth McCambridge