Bankruptcy Bill Aims to Restrict Chapter 11 in Sex Abuse Cases

A bipartisan bill aimed at curbing the use of Chapter 11 to limit liability in mass tort cases would impose stricter standards on organizations considering bankruptcy to address child sex abuse claims.

A group of House lawmakers will introduce the bill Wednesday to tighten disclosure, voting, and oversight requirements for debtors—including corporations and nonprofits—seeking to resolve such claims through bankruptcy. The effort is led by Reps. Deborah Ross (D-N.C.), Claudia Tenney (R-N.Y.), Emilia Sykes (D-Ohio), and Monica De La Cruz (R-Texas).

The legislation aims to give victims more tools to navigate complex bankruptcy cases. In recent years, multiple Catholic dioceses and nonprofit organizations, including the Boy Scouts of America, have filed for bankruptcy to limit exposure to abuse lawsuits.

A key feature of US bankruptcy law is the automatic stay, which halts most creditor actions during a case. The bill would carve out an exception for child sex abuse claims and require courts to appoint an independent forensic accountant to assess the debtor’s assets.

A central provision of the legislation would restrict liability shields for affiliates and nonbankrupt insiders, requiring approval from at least 90% of voting claimants. It would also require creditors to receive sufficient information to make informed decisions about such releases.

Ross said that the 90% threshold responds to the US Supreme Court’s 2024 decision in Harrington v. Purdue Pharma LP. The high court held that the Sackler family members who controlled Purdue, which was accused of fueling the opioid crisis, couldn’t obtain liability releases through bankruptcy without creditor consent.

“We wanted to make it clear that you couldn’t just have 50% of the people agree to release the head of the Boy Scouts or the head of USA Gymnastics,” Ross said in an interview. “It would have to be a very high bar because that would get the person who might’ve been able to stop this off the hook for their responsibility.”

Bankruptcy reform legislation often struggles to gain traction in a split Congress. A similar measure was introduced in 2024.

Ross said bipartisan backing and renewed attention to abuse cases could help advance the bill.

“Child sex abuse is even more in the news because of the Epstein files, and Congress is looking for ways to show that we can work on this issue in a bipartisan way,” she said.

The bill would bar discharge or release of debts tied to child sex abuse where the debtor was directly responsible or grossly negligent, and would deem such claims timely in bankruptcy regardless of state statutes of limitation.

It would also allow victims to be heard in proceedings that have traditionally focused on an entity’s finances as courts would hold conferences to consider victim impact statements.

“Victims would be able to have their voices heard because bankruptcy is just dollars and cents,” Ross said.

Separately, another bipartisan group of lawmakers reintroduced legislation targeting the maneuver known as Texas Two-Step, a bankruptcy strategy used by some companies facing mass tort claims.