Vermont’s Roman Catholic Diocese, now seeking to reorganize its depleting finances in U.S. Bankruptcy Court, has received permission to sell its former Loretto Home senior living facility in Rutland.

In a ruling this week, Judge Heather Cooper said she’d allow the state’s largest religious denomination to accept a $1 million offer from Rutland’s nonprofit Cornerstone Housing Partners, which wants to transform the Meadow Street building into transitional and long-term affordable apartments.

“The proposed sale represents the highest and best offer for the property,” church lawyers argued in court papers, “and the proceeds of the sale will assist the diocese in funding the administration of this bankruptcy case and ultimately paying creditors.”

Cornerstone said it had a $3.9 million commitment from the state Agency of Human Services to help it buy and rehabilitate the 20,000-square-foot facility.

The nonprofit could immediately launch its first-phase plan for 16 units of emergency family housing under a new state law that expands locations for shelters. But the $1 million sale is contingent on receiving a Rutland zoning permit for a second-phase plan for at least 20 long-term apartments.

“We’re not going to purchase the building if we can’t create affordable apartments there,” Mary Cohen, the nonprofit’s chief executive officer, told VTDigger. “The goal is to create permanent housing.”

Cornerstone already has heard questions from neighbors as it seeks a zoning permit from Rutland’s Development Review Board.

“I think it’s a lack of understanding,” Cohen said. “We’re good landlords. We house people and take good care of our property. The application process will allow a public conversation about what our plans are.”

The Vermont Catholic Church filed for Chapter 11 protection a year ago after a series of clergy misconduct settlements reduced its assets by half, to about $35 million. Since then, 119 people have submitted new child sexual abuse allegations — almost double that of an earlier 67 accusers who previously settled cases over the past two decades.

To raise money, the diocese enlisted Pomerleau Real Estate to market the Loretto Home after the facility closed in 2023. The property, under the control of the church since 1904, was initially listed at $2.25 million before being reduced to $1.95 million and, by this year, $1.3 million, court records show. The diocese received an unspecified number of offers before accepting Cornerstone’s $1 million bid this summer.

Under the Chapter 11 process, the Vermont church must receive court approval for all major purchases and sales until a judge decides on its call for a reorganization plan.