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Sexual Abuse Lawsuits and Chapter 11 Bankruptcy

Sexual Abuse Lawsuits and Chapter 11 Bankruptcy

As we have noted in other posts, organizations such as the Boy Scouts of America and at least two dozen dioceses of the Roman Catholic Church have filed Chapter 11 bankruptcy petitions with the U.S. Bankruptcy Courts in an effort to limit their losses in sexual abuse lawsuits. Since many abuse victims are unaware of how a Chapter 11 bankruptcy could affect their legal right to demand compensation for abuse they have suffered due to the actions (or inaction) of an organization’s employees, agents and/or managers, the sexual abuse victims lawyer at The Doan Law Firm explains how a bankruptcy petition can limit a business’ exposure to liability in sexual abuse lawsuits.

What is a “bankruptcy petition”

When a person or a business finds themselves in a position where they are overwhelmed by debt, they have the right to ask (“petition”) a court for “relief” from some or all of that debt. In the United States, such petitions are filed with the U.S. Bankruptcy Court. A small business or an individual usually files a bankruptcy petition with the court that has local jurisdiction for the filer’s place of business or residence. Bankruptcy petitions can be filed under different chapters of the U.S. Bankruptcy Code, but we will discuss only a “Chapter 11” or “reorganization” bankruptcy.

In a Chapter 11 filing, when a company or some other organization finds that its debts and potential debts could financially threaten its ability to carry on with its usual operations, the business asks a United States Bankruptcy Court to order a “timeout” while it “reorganizes” its affairs and obligations to its creditors. The court will then set a date for the organization to submit a plan to the court that specifies how it plans to reorganize its debts so it can continue to operate.

During a bankruptcy case, the court will usually temporarily halt any legal actions that have already been filed against the business. More importantly, particularly in the case of sexual abuse lawsuits, the organization can ask the court to set a deadline after which no new lawsuits can be filed regardless of when the abuse occurred prior to the bankruptcy filing. As an example, consider the following cases:

  • The Diocese of Buffalo (NY) filed for Chapter 11 in February 2020. All lawsuits filed prior to the bankruptcy are temporarily “on hold” but can proceed in the future. However, the court has ordered that no new lawsuits alleging past sexual abuse can be filed after August 13th of this year.

  • The Boy Scouts of America also filed for Chapter 11 in February of this year. A different bankruptcy court has ruled that any lawsuits filed before November 16th of 2020 will be allowed to proceed but no sexual abuse lawsuits filed after that date will be allowed.

  • State and local Boy Scout Councils have not, as of this post, been included in the Boy Scouts of America bankruptcy case. However, the court could later rule that they be included in the national organization’s bankruptcy filing. Should that be the case, lawsuits against local councils could be disallowed after the November deadline.

Protecting the legal rights of sexual abuse victims

In most states victims of childhood sexual abuse are allowed to file lawsuits against there abusers even if the abuse occurred years ago. However, each state has imposed its own time limits (statutes of limitations) that set such time limits. Once a statute of limitations has expired, you will never be able to claim your legal right to compensation. Since many organizations are resorting to Chapter 11 bankruptcy to limit their liability in sexual abuse lawsuits, many victims may be unaware that their rights are in jeopardy.

If you are a survivor of childhood sexual abuse, your first step toward claiming your legal rights should be to contact a lawyer with experience in dealing with each state’s statutes of limitations as well as experience with the bankruptcy courts. One such lawyer is the sexual abuse victims lawyer at The Doan Law Firm, a national law firm with offices located throughout the nation.

When you contact our firm your confidential case review and first consultation with our sexual abuse victims lawyer are always free of charge and do not obligate you in any way to hiring us to represent you in court. Should you later decide to file a lawsuit against your abuser, and that you would like for us to represent you in court, we are willing to assume full responsibility for all aspects of preparing your case for trial in exchange for a percentage of the final settlement we are prepared to win for you.


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