Bloomberg Law by Randi Love 

Childhood victims of sex abuse would be given more tools to navigate the complexity of bankruptcies under a bipartisan proposal from House lawmakers.

Legislation introduced Thursday by Reps. Deborah Ross (D-N.C.) and Claudia Tenney (R-N.Y.), if enacted, could make it harder for organizations like the Boy Scouts of America or the Catholic dioceses to use bankruptcy to corral hundreds of child sexual abuse claims or reduce payments to victims.

Measures seeking to amend bankruptcy law, like many others, often struggle to gain traction in a split Congress. At least four bills in the House of Representatives and two in the Senate focusing on different aspects of bankruptcy law have been introduced in the 118th Congress, but none have moved to the floor for votes. The latest legislation, however, adds to pressure on courts and lawyers as they push through high-profile bankruptcies tied to sex abuse claims.

The Closing Bankruptcy Loopholes for Child Predators Act is intended to address how youth groups, sports governing bodies, and religious entities, among other organizations, have used bankruptcy courts to “evade accountability” for hundreds of child sex abuse lawsuits, Ross said at a press conference Thursday.

“By obstructing discovery and silencing victims, these entities prolong court proceedings and deprive victims of the justice they rightfully deserve,” Tenney said in a press release.

The bill would exempt cases involving child sex abuse claims from an automatic stay on all litigation imposed by a bankruptcy filing, require a forensic accountant to assess the entity, and expand the discovery phase of litigation, Ross said. Courts would also be subject to a deadline to hold hearings on covered claims allowing for “victim impact statements.”

Such statements would be voluntary written or oral accounts from claimants who are often “sidelined” in the bankruptcy system, said Marci Hamilton, the CEO of Child USA, a nonprofit focusing on children’s civil rights.

The provision “opens the door to discovery,” which allows claimants to share their stories that were otherwise silenced through the bankruptcy process, Hamilton said during the press conference. Child USA endorsed the bill.

The bill also aims to clarify language associated with “sexual abuse of a child” to include violations of certain sections of the bankruptcy code.