WSJ Pro Bankruptcy by Soma Biswas

New legislation would weaken protections in chapter 11 for organizations that filed for bankruptcy to address sex abuse claims.

The bipartisan measure introduced Thursday by Rep. Deborah Ross (D., N.C.) and Rep. Claudia Tenney (R., N.Y.) would give abuse survivors more tools to uncover information about abusers and how organizations in bankruptcy handled incidents.

Survivors could also make victim-impact statements in bankruptcy court, where companies and nonprofits can turn to resolve mass litigation over claims of sex abuse.

There has been a “disturbing trend” of organizations facing liability over sex abuse seeking refuge in bankruptcy court, Ross said at a press conference. The legislation aims to make the chapter 11 process fairer for sex abuse victims than it is today, she said.

Dozens of Catholic dioceses and other organizations including the Boy Scouts of America sought bankruptcy protection in recent years after being hit with thousands of sex abuse claims. Most of those chapter 11 cases have been mired in litigation for years.

The Diocese of Rockville Centre in suburban Long Island, N.Y., last week sought to dismiss its bankruptcy without reaching a settlement of hundreds of abuse claims. A plan to compensate thousands of people claiming abuse as Boy Scouts also faces legal challenges from some victims and insurance companies.

The new bill will modify the automatic stay that pauses litigation against organizations in chapter 11 as well as the discovery process allowing plaintiffs to seek evidence to support claims.

“The primary goal is to open the door to discovery. The way it works now judges are deprived of the facts of how institutions operated,” said Marci Hamilton, who runs Child USA, a non-profit that advocates for eliminating or extending statutes of limitations on sex abuse lawsuits.

Institutions in bankruptcy will also be required to hire forensic accountants to value their assets. Several victims on creditors committees in bankruptcies involving sex abuse claims said the chapter 11 process is too easy on institutions they seek to hold responsible.

“To go through bankruptcy provides the entities that perpetrated this a soft landing,” Steve Moreno, who is on the creditors committee in the bankruptcy of the Archdiocese of San Francisco, said at the press conference.

Write to Soma Biswas at