Bankruptcy law promises a fresh start for those overwhelmed by debt. But for institutions facing thousands of child sexual abuse claims, Chapter 11 has become something else entirely: a shield against accountability that leaves survivors with a fraction of what courts would otherwise award them.
The pattern is now unmistakable. When the Boy Scouts of America faced 82,000 abuse claims potentially worth tens of billions, they filed for bankruptcy in 2020. The Catholic Church has shepherded more than 30 dioceses through bankruptcy proceedings to limit abuse payouts. USA Gymnastics used bankruptcy to cap Larry Nassar survivors' claims. Each time, The Hill reports, institutions emerge with their assets largely intact while survivors accept whatever settlement the bankruptcy court approves — often pennies on the dollar.
The numbers tell the story of this legal arbitrage. Outside bankruptcy, jury awards for child sexual abuse cases routinely exceed $1 million per survivor, reflecting the lifelong trauma these crimes inflict. Inside bankruptcy court, the same survivors might receive $50,000 or less. The Boy Scouts' bankruptcy plan, approved in 2023, will pay an average of $68,000 per claimant from a pool of 82,000 survivors — a fraction of what individual lawsuits would have yielded. Meanwhile, the organization continues operating, having shed billions in potential liability through a legal maneuver designed for failing businesses, not institutional predators.
Some argue bankruptcy provides the only viable path for compensating large numbers of survivors when an institution faces thousands of claims. They point to the alternative: drawn-out litigation where early plaintiffs might receive large awards while later claimants find an empty defendant. Bankruptcy, in this view, ensures some payment for all survivors rather than full payment for a lucky few.
But this argument ignores how institutions weaponize the bankruptcy process itself. By filing preemptively — before most lawsuits even reach trial — organizations cap their total liability at a fraction of what survivors deserve. They hire specialized law firms that know how to minimize payouts while protecting institutional assets. Catholic dioceses have pioneered techniques like separating valuable real estate into independent trusts before filing, ensuring church properties remain beyond survivors' reach. The bankruptcy becomes not a last resort for an insolvent organization but a calculated strategy to limit accountability.
The fix exists in Congress, where legislators could amend bankruptcy law to prevent institutions from using Chapter 11 to escape child abuse liability. Several proposals would either bar organizations with substantial abuse claims from filing for bankruptcy or ensure that abuse claims receive priority over other debts. The same legislators who claim to protect children could close this loophole tomorrow.
Yet these reforms die quietly in committee, killed by lobbying from the very institutions that benefit from the current system. The Catholic Church alone spent $10.6 million on federal lobbying between 2011 and 2023, much of it focused on defeating statute of limitations reforms and bankruptcy changes that would help abuse survivors. When protecting institutional wealth conflicts with protecting children, Congress has made its choice clear.
What makes this particularly cruel is the re-traumatization built into the bankruptcy process. Survivors must publicly detail their abuse to faceless claims administrators. They must prove their trauma meets specific evidentiary standards. They must wait years for resolution while institutions continue operating as if nothing happened. The very system meant to provide justice becomes another source of harm.
The bankruptcy loophole represents more than a legal technicality — it's a moral choice about whose suffering matters. Every institution that files for bankruptcy to escape abuse claims makes a calculation: their financial survival matters more than survivors' justice. Every legislator who refuses to close this loophole endorses that calculation. Until Congress acts, bankruptcy court will remain what it has become: a sanctuary for institutional predators and a graveyard for survivors' claims.
