Catholic Dioceses, USA Gymnastics, The Boy Scouts of America Among Nonprofits Filing for Bankruptcy Amid Sexual Assault Lawsuits

In 2019, 23 states, Washington D.C., and two U.S. territories passed new laws to extend the civil statute of limitations expiration date for victims of childhood sexual abuse. The recent legislation allowed victims of older cases to sue their abusers and the organizations that were supposed to protect them. Most of the statute extensions last one or more years, and we continue to see the passage of new laws regularly.

The Nonprofit Organizations Found Safety in Bankruptcy Court

Sadly, in response to the lawsuits, many organizations that are defendants in the cases filed for relief in bankruptcy court. Among those filing bankruptcy are nonprofit organizations such as the Boy Scouts of America, the Boys and Girls Club, and Catholic Institutions.

Four of the defendants are New York dioceses facing over 500 claims of sexual abuse. All nonprofit groups filing for relief cite recent law changes, extending the time frame for child abuse victims to seek justice. The filings stalled the current civil actions and blocked victims from filing new cases in the future. The lawsuit plaintiffs had no choice but to negotiate settlements within the bankruptcy courts.

More Trauma for the Victims of Childhood Sexual Abuse

Bankruptcy courts across the United States are diminishing the impact of statute of limitations reform. Moreover, if the defendant files for relief in bankruptcy court, it can force victims to come forward and settle who isn’t ready yet. Missing the bankruptcy-claims deadlines can mean losing the chance to seek justice.

An investigation uncovered at least 23 bankruptcies filed by nonprofit organizations involved in child sexual abuse scandals that forced victims to keep compensation from a trust. One organization is USA Gymnastics, and the outpouring of lawsuits alleging abuse by the convicted child molester, Larry Nassar.

It is essential to note that organization bankruptcies do not provide individual protection for abusers. However, they granted immunity to the nonprofits that allowed the abuse to continue after victims came forward. Even so, the bankruptcy filings have devastated countless victims of childhood sexual abuse after legislation granted them the legal right to seek justice from the institutions that failed to protect them.