Major Adoption Agency Suddenly Goes Bankrupt, Leaving Hundreds of Families With Unanswered Questions

In many cases, the process of adopting a child takes years. While the wait is certainly frustrating, most parents believe it was a small price to pay for an addition to their family. However, one couple is expressing grief after waiting years and paying thousands for an adoption, only to find out that the adoption agency had shut down in the blink of an eye.

Left with nothing but an empty nursery, empty wallets, and empty hearts, they’ve decided to speak out about their horrible experience.

Heather and Bruce Davis are just one couple from the nearly 800 adoptive parents who were let down when the Independent Adoption Center, which the couple had been working with for many years, suddenly went out of business. The couple had paid more than $10,000 to the IAC and had absolutely no reason to suspect that something was amiss. When they got an email at the end of January, they were shocked, to say the least.

“It is with deep sadness that we write to inform you that the Independent Adoption Center (IAC) is declaring Chapter 7 bankruptcy and will be closing permanently effective immediately,” said the email.

“I trusted this company — that they were doing the right thing with my money, and trying to help me build my family,” Davis said. “I can’t control that I can’t have kids on my own. I trusted someone else to bring a family to me and my husband and my two dogs.”

The closure came as quite a shock to the hundreds of families like the Davises, some of whom had already gone through the tedious home-study process, some of whom already had a child in their home and were simply waiting for the agency to finish the legal process, and some of whom had already paid up to $20,000 in fees. The IAC cites more than 3,000 creditors in its bankruptcy papers.

In its closure letter to clients, the IAC cited the downslope of the “climate of adoption” as the primary reason for its bankruptcy, claiming that “there are fewer potential birth parents than at any other point in our 34-year history.”

It’s true that adoption rates in America are rapidly declining. Adoption rates fell by 15% from 2001-2012, with a particularly sharp decline in international adoptions. Currently, about 38% of adoptions are private domestic adoptions, while 37% are foster care adoptions. The other 25% are international adoptions.

The IAC had started reporting losses back in 2014, and after the executive director stepped down in 2016, the agency hired an interim director, Marcia Hodges, at a rate of around $100 an hour until a suitable replacement could be found. However, in the days leading up to the closing, Hodges took a two-week vacation to Tanzania and was unavailable. The day after returning on January 25, she discussed filing Chapter 7 bankruptcy with the board, and a resolution was filed that very same evening.

However, it wasn’t until the 31st of January that Hodges finally held a conference call with employees to alert them of the decision. According to a trustee, Hodges also told the employees that they could take keep their work computers if they left $250 on their desk. Considering that the computers possibly contained sensitive client information, it’s a major security breach. Today, about 66% of businesses have worked with an outside IT firm in the past year, in part to manage cybersecurity threats.

“If you’re asking if we could have done a better job, if I ever had to file Chapter 7 again, yes I would do a better job,” said President Greg Kuhl, who is an adoptive parent himself. “I have never done this, the board has never done this, employees have never done this.”

Many parents are frustrated that the nonprofit continued to accept families despite its financial problems. While most nonprofits are exempt from paying federal taxes under Section 501(c)(3) of the Internal Revenue Code, the organization is still required to preserve the financial value of the company. And according to Nonprofit Quarterly, “unlike for-profit corporations, nonprofits cannot be forced into bankruptcy involuntarily.”

For would-be parents hoping to recoup their money, a letter posted on the company’s website advised: “The court will appoint a trustee to administer the bankruptcy estate. If you are owed any money by IAC, the court will notify you of the case and you will have an opportunity to file a Proof of Claim for any refunds you believe are due to you.”

But, according to that trustee, the agency may have violated multiple state laws by not warning parents that it would be closing.

Ultimately, families who were expecting to add another member will have to put their plans on hold. And, unfortunately, trustee Marlene Weinstein says that “the hundreds of couples left in the lurch are unlikely to get back a cent of their money.” Davis said that even though she and her husband are out $12,000, they’re not giving up hope.

“I can’t, just because I’m out that money, abandon my dreams of becoming a mother. I want to be a mom, so I am going to figure out how to get it done.”