Property owned by a US Roman Catholic archdiocese can be used as assets in abuse claim cases, a court has ruled.
The archdiocese has previously claimed it has no money left
Bankruptcy Judge Elizabeth Perris ruled the Archdiocese of Portland, Oregon, not its parishes owns church assets.
The decision has dealt a major blow to the archdiocese's efforts to protect church property from claims filed by alleged victims of priest sex abuse.
Portland declared itself bankrupt in July 2004, saying it could not meet the cost of abuse claim cases.
It was the first archdiocese in the US to take such action, which resulted in the suspension of the start of a civil trial of a priest accused of molesting more than 50 boys.
Archdiocese attorneys in Oregon had asked the federal bankruptcy court judge to shield churches and other assets as parish property the archdiocese was holding "for the benefit of others".
But in her ruling on Friday, Judge Perris rejected the contention that church assets were being held in trust, preventing them from being used to settle lawsuit debts.
She also dismissed the archdiocese's claim that it should be treated under church law, rather than federal law.
The ruling does not automatically mean that the Archdiocese of Portland would be forced to sell off church property to pay settlements or court awards to sex abuse victims.
Judge Perris left open the question of whether the sale of individual church properties could pose an unfair burden on the practice of religion under the Religious Freedom and Restoration Act of 1993.
Speaking to news agency AFP archdiocese spokesman Bud Bunce said: "We are disappointed that the bankruptcy law eliminates the interests of the parishes."
He said the archdiocese's legal team would examine the ruling and "make a decision about possible appeals".
Rulings made in the federal court are likely to set precedents for cases in other states.
Other US Roman Catholic dioceses are also facing bankruptcy, or have had to sell property, to meet the cost of abuse claims brought against priests.
In February 2004, a report commissioned by the Church said more than 4,000 Roman Catholic priests in the US had faced sexual abuse allegations in the last 50 years.
It said more than 10,000 children - a large majority of them boys - were allegedly abused, but victims' representatives said this was an underestimate.
The Archdiocese of Portland has already settled claims by some 130 people who say they were abused by priests, paying out more than $53m.