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An expert on bankruptcy explains what’s next as Boy Scouts of America establishes a $2.4 billion fund to compensate abuse survivors.


On April 19, 2023, the Boy Scouts of America has declared it is out of bankruptcy case after removing one of the last legal hurdles in his way. Some insurance companies and sexual abuse plaintiffs objected to the Boy Scouts’ plan to pay plaintiffs, but the 3rd U.S. Circuit Court of Appeals ruled that the plan can still proceed while the insurers’ appeal is pending. It is now possible to start paying at least $2.45 billion to resolve about 82,000 claims against the Boy Scouts and affiliates filed by people who claim they sexually abused as a child about the past 80 years.

The Boy Scouts work through the national organization known as the BSA, which includes hundreds of separate but affiliated organizations known as local councilsand called faith-based or community groups chartered organizations. Because these troop-sponsoring nonprofits are responsible for ensuring the safety of children in Scouting across the country, they have all faced claims of child sexual abuse.

The BSA filed for bankruptcy in February 2020 to call a halt hundreds of lawsuits pending at the time in state courts. More than two years later, the BSA reached an agreement with many of its insurers, all of the municipalities, some of the charter organizations and about 85% of all sexual assault claimants on a plan to pay claims.

The conversation asked Marie T. Reillya Penn State law professor who studies bankruptcy cases related to child abuse claims against Catholic dioceses to explain what this means.

What happens now?

The plan that the court has approved in the bankruptcy case of the BSA will create a settlement trust to process and pay claims of sexual abuse.

Two retired judges and a committee made up of attorneys representing sex abuse plaintiffs will administer the trust, which will be the largest compensation fund for sexual abuse once based in the US It will operate independently of the BSA.

The trust will assume responsibility for all claims against the BSA. All parties contributing to this are released from their liability.

Where will the money come from?

The BSA will add to the trust property valued at an estimated $220 million. Local councils will contribute approximately $515 million in cash, property and money obtained from their insurers. Chartered organizations, including the Church of Jesus Christ of Latter-day Saints And Roman Catholic and Methodist churches, schools and other affiliated institutions, will also receive contributions and a liability waiver for claims.

The Church of Jesus Christ of Latter-day Saints, also known as the Mormon Church, used to participate in the Boy Scouts, but cut ties with it in 2018. It will contribute $250 million.

Insurance companies that have issued policies covering the BSA will contribute about $1.6 billion. The settlement trust trustee has the power to sue the insurance companies that did not agree to the settlement to try to get more money to pay claims.

How much money will the surviving relatives receive and when will the payments begin?

People who have filed reports of sexual abuse have three options:

1) Accept a payment of $3,500 based on the information already submitted on their claim in the bankruptcy case. About 6,700 survivors have already chosen this option.

2) Submit additional information and let the trustee determine the amount based on agreed factorsincluding the severity of the abuse.

3) Sue in a state court and let a jury determine the amount.

Payments do not begin to flow until the trust determines the payment amount of each claim. If the fund is not large enough to pay each claim in full, the trust will reduce the amount of each claim to reflect the estimated shortfall.

It’s hard to say how long it will take to process the nearly 75,000 claims that didn’t choose the $3,500 option.

Among other things, the trust will need to hire and onboard staff and establish secure systems to collect and evaluate personal information from tens of thousands of people.

This is likely both expensive and slow.

How does this settlement affect the Boy Scouts?

The Boy Scouts face an uncertain future following the bankruptcy case.

That of the organization income depends on dues, contributions from its troop sponsoring organizations, product sales, service fees and donations. And the contribution is lower by a sharply declining membership. The BSA now has a bit more than 1 million members across the country – approx half as much as in 2019.

Converting some of the Boy Scouts’ property into cash to meet the organization’s obligations under the bankruptcy plan is complicated. It can take years to achieve this, extending the timeline.

Municipalities are already selling real estate to raise the money they need to pay the contribution to the fund.

A congregation in New Jersey, for example, is selling his land in the Pocono Mountains to pay his share of the contribution to the compensation fund.

Local residents are concerned that the pristine land, estimated to be worth $4 million, will eventually be lost to developers.
The same controversy is playing out with regard to the sell municipal real estate in Connecticut.

The US Forest Service estimates that every day 6,000 acres (24 square kilometers) of open space is lost to other uses. Local Boy Scouts councils own it a significant portion of open space in the US, and much of it could be lost.

The Deer Lake Boy Scout Preserve in Killingworth, Connecticut, is one of many properties being sold by local councils across the country.
AP Photo/Pat Eaton-Robb

Are there precedents for this?

Catholic organizations have solved accountability for child sexual abuse in bankruptcies with plans similar to the BSAs. But the size of the Boy Scouts’ case in terms of the number of claims and the size of the settlement fund is far greater than any case involving a single diocese or other non-profit bankruptcy filing.

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