One of the claimants in the bankruptcy described the proposed settlement as "a Christmas gift for lawyers" and said it likely would not be approved by the committee of creditors.
Financial records for the archdiocese show a $9 million deficit in operating activities for the 2014 fiscal year and uncertainty about the costs of its sexual abuse scandal.
The mediation between the Milwaukee archdiocese and its creditors, most of them survivors of sexual abuse, ended Tuesday without a resolution.
The bankruptcy proceedings were placed on hold pending a decision by the 7th Circuit Court of Appeals related to nearly $60 million that was transferred to a trust fund shortly before the bankruptcy action was filed nearly four years ago.
The $1.35 million will come from surplus cash but covers only a fraction of the archdiocese's legal bills so far, which total close to $14 million.
The legal bills are far greater than the $4 million the archdiocese offered survivors of sex abuse before filing for bankruptcy on Jan. 4, 2011.
The diocese of Gallup, N.M., has formally started the process of bankruptcy, citing the costs incurred by a growing number of sex-abuse claims.