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How Does Bankruptcy Work in Sexual Abuse Cases?

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In civil lawsuits against institutions found responsible for child sexual abuse, the bankruptcy process starts when the institution cannot meet its financial obligations due to the overwhelming costs of legal claims. Bankruptcy allows the institution to restructure or liquidate its assets to satisfy its debts and compensate the survivors.

Here is a general overview of the bankruptcy process in such cases:

Filing For Bankruptcy 

The institution that has been found responsible in some way for failure to protect children against sexual abuse or negligence in their duty can legally file for bankruptcy. Bankruptcy filings must be under all applicable laws in that jurisdiction. 

The specific types of bankruptcy filing (e.g., Chapter 11, Chapter 7) depends on the circumstances and goals of the institution. 

Survivors have the right to file claims for compensation as creditors in bankruptcy proceedings. They submit their claims detailing the damages suffered and seek financial restitution.

Automatic Stay 

Filing a bankruptcy petition imposes an automatic stay, halting all legal proceedings, including civil suits, against the institution. The court now has control over the assets and legal claims to ensure an orderly resolution of the case.

Court Oversight and Appointment of Trustee

The bankruptcy court oversees the case and appoints a trustee to manage the institution’s assets. The trustee’s role is to ensure a fair distribution of the available funds to creditors, including the victims of child sexual abuse.

Claims Process

A claims process allows survivors to file their compensation claims. The court determines the validity and priority of these claims based on the applicable bankruptcy laws. A sexual abuse claim form is sent to survivors to fill out. It is always best for a survivor to consult a sexual abuse attorney when filing out the form to maximize compensation. 

Reorganization Plan 

Depending on the type of bankruptcy filed, the institution develops a plan of reorganization to continue its operations and compensate victims over time or opts for liquidation. The sale of assets is called liquidation. The court approves or rejects the proposed plan based on its feasibility and fairness.

Compensation for Survivors

Bankruptcy proceedings allow survivors to seek financial compensation for their damages. This compensation can help survivors cover medical expenses, therapy costs, loss of income, and other financial burdens resulting from the abuse. An award is made to survivors in a lump sum and not broken out by categories; however, it is always important to show the need for compensation in various areas on the claim form to maximize compensation. 

If a reorganization plan is approved, the institution works towards fulfilling its obligations and compensating the victims as outlined. In a liquidation scenario, the proceeds from the sale of assets get distributed among the creditors, including the victims, according to the priority established by the court.

Distribution of funds and fulfillment of approved plans are the final stages of bankruptcy. The institution may continue its operations, albeit in a restructured form, or cease to exist if liquidated.

Impact on Survivors

Bankruptcy proceedings impact survivors of sexual abuse, both positive and negative. The specific effects may vary depending on various factors, including the nature of the abuse, the bankruptcy process, the institution involved, and the support systems available to survivors. 

Participating in the bankruptcy process allows survivors to assert their rights and have their voices heard. It provides empowerment and validation. Survivors become creditors with legitimate claims. This acknowledgment can help survivors regain control over their lives.

Engaging in bankruptcy proceedings can also evoke various emotional and psychological responses in survivors. The process may trigger distressing memories and emotions associated with the abuse, leading to increased stress, anxiety, or trauma symptoms. Adequate emotional support and therapeutic resources are essential to help survivors navigate these challenges. Andreozzi + Foote has wrap-around trauma-informed supportive services for survivors while navigating this process. 

Bankruptcy proceedings can be lengthy and complex, leading to delays in receiving compensation. The uncertainty surrounding the case outcome and the amount of compensation survivors may receive can further contribute to stress and anxiety.

Participating in bankruptcy proceedings may require survivors to recount their experiences, provide evidence, and engage in legal processes, which can force them to relive the trauma of the abuse. Reliving that trauma is emotionally challenging and requires appropriate support and sensitivity from legal professionals and support networks.

In some cases, compensating all survivors fully through bankruptcy may be limited, especially if the institution’s assets are insufficient to pay all survivors fully. Lack of assets can result in survivors receiving less compensation than anticipated or required for their recovery and ongoing needs.

Role of Survivors

Survivors of sexual abuse play significant roles in bankruptcy proceedings against organizations responsible for their abuse. The exact involvement and impact may vary based on jurisdictions’ specific bankruptcy laws and procedures.

Survivors have the right to assert their legal rights within the bankruptcy process. They can engage legal representation to advocate for their interests, protect their rights, and navigate the complexities of the proceedings.

Survivors may attend meetings, such as creditors’ meetings or hearings. They can voice their concerns, provide testimony, and express their opinions regarding the reorganization or liquidation plan proposed by the organization.

Sometimes, survivors may actively negotiate with the institution or its representatives. They can work towards securing a fair settlement or ensuring the bankruptcy plan adequately addresses their compensation needs.

In more significant bankruptcy cases, survivors may be able to form or join committees representing their interests. Committees of individuals with similar claims collectively protect their rights and advocate for fair treatment and compensation.

Survivors can challenge the discharge of their claims if they believe the organization is attempting to avoid responsibility for the abuse through bankruptcy. Survivors can present evidence demonstrating that they should remain eligible for compensation.

Through their legal representatives, survivors can closely monitor the bankruptcy proceedings to ensure the organization is fulfilling its obligations. They may object to actions or plans they believe are unfair or inadequate.

Possible Policy Changes 

During bankruptcy proceedings in sexual abuse cases, survivors can advocate for policy change within the institutions involved. The primary focus of bankruptcy proceedings is financial matters and victim compensation. Survivors utilize their voices and experiences to push for changes that address the root causes of abuse and prevent future instances. 

Here’s how survivors can advocate for policy change:

  • Public Awareness and Media Engagement: Survivors can speak about their experiences and advocate for policy change through media interviews, op-eds, social media, or other public platforms. 
  • Engaging Stakeholders: Survivors can reach out to various stakeholders, including legislators, government agencies, advocacy groups, and community organizations. They can share their perspectives and recommendations for policy changes that would improve the safety and accountability of institutions in preventing and addressing sexual abuse.
  • Testifying in Legislative Hearings: Survivors can participate in legislative hearings or public forums that discuss issues related to sexual abuse and institutional responsibility. 
  • Seeking Representation in Reformation Committees: In some instances, bankruptcy proceedings may involve the formation of reformation or oversight committees. Survivors can have representation on these committees, allowing them to directly influence policy decisions and advocate for sweeping changes within the institution. Survivors must apply to serve on a committee. They are interviewed and then appointed to a small committee to represent the larger group of survivors. 
  • Pushing for Policy Conditions: As part of the bankruptcy negotiations or settlements, survivors can advocate for specific policy conditions that the institution must adopt as a part of its reorganization plan. Implementing robust child protection policies, mandatory training, external oversight, or internal reporting and investigation procedures changes.
  • Monitoring Compliance: Survivors can actively monitor the institution’s compliance with policy changes or reforms. Survivors can help ensure that the promised changes are implemented effectively and sustained long-term.

An Attorney is Vital

Bankruptcy proceedings can offer survivors a sense of accountability, mainly if the institution takes responsibility for its actions and makes efforts to reform its policies and practices. Seeing the institution held accountable for the abuse can contribute to survivors’ healing and preventing future abuses.

Survivors must have access to specialized support services, such as counseling, therapy, and legal guidance, throughout the bankruptcy process. Advocacy organizations, victim assistance programs, and legal professionals experienced in handling sexual abuse cases can provide support. They can help survivors navigate the complex emotions and challenges during this time. 

It’s important to note that survivors’ involvement and influence in bankruptcy proceedings can vary based on the specific circumstances and the jurisdiction’s legal framework. 

We will ensure your voice matters, and you receive the best possible outcome. Consulting with our sexual abuse lawyers can provide more accurate guidance in specific cases. The attorneys at Andreozzi + Foote have vast experience ushering survivors through these complex court processes.



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