What Happens When a Diocese Declares Bankruptcy During Abuse Litigation?

In response to sexual abuse litigation, a diocese might declare bankruptcy. As a victim, you need to know what that means for your civil sexual abuse lawsuit and your access to damages.

When a diocese files for bankruptcy, any litigation involving the diocese pauses indefinitely, including sexual abuse lawsuits. You may get damages through the bankruptcy case instead. Still, it is a different process than settling or proving a lawsuit. To make sure you still get some compensation and justice, get an experienced lawyer’s help.

Call The Law Office of Andrew Shubin’s sexual abuse victim attorneys at (814) 826-3586 for your free case review.

What Happens if a Diocese Declares Bankruptcy During Abuse Litigation?

Almost everything about how you get damages for sexual abuse changes when the diocese you filed a civil lawsuit against responds by declaring bankruptcy.

Automatic Stay

Filing for bankruptcy triggers an automatic stay on most debt collection efforts and lawsuits against a diocese, including abuse litigation. No matter what stage the lawsuit is at, it will most likely be paused by the automatic stay.

Since the automatic stay stops the lawsuit, it also stops any ongoing discovery of internal records and information related to the case from the diocese itself.

Venue Change

Sexual abuse lawsuits are filed and litigated in civil court. If a diocese files for bankruptcy, they do so in federal bankruptcy court. This changes the venue of the case. All bankruptcy cases are federal cases.

No More Lawsuits

As long as the automatic stay is in place and the bankruptcy case is ongoing, no more lawsuits can be brought against the diocese for any abuse. A diocese filing for bankruptcy right before a victim’s statute of limitations expires could, in theory, prevent the victim from obtaining justice through civil litigation.

Different Path to Compensation

Recovering some damages is still possible if a diocese files for bankruptcy during abuse litigation. Victims would file a “Proof of Claim” with the bankruptcy court, explaining the amount the diocese owes them and the reasons why.

Debts from malicious injury, like sexual abuse, are non-dischargeable in bankruptcy, meaning the diocese has to compensate you if the court recognizes your claim. The trustee assigned to the bankruptcy case would be responsible for liquidating assets or overseeing payments, and there would be no opportunity for a large jury award.

Even if you didn’t file a sexual abuse lawsuit before the diocese declared bankruptcy, you may still get damages from the bankruptcy case when we file a thorough Proof of Claim.

What Should I Do if a Diocese Declares Bankruptcy During Abuse Litigation?

Don’t abandon your fight for compensation if the diocese you sued for sexual abuse recently filed for bankruptcy. You may still get damages, and to do so, you must file a Proof of Claim.

Prepare a Proof of Claim

When preparing a Proof of Claim document, we must identify the amount of the claim and explain its basis. We must also attach relevant documents supporting your claim, such as redacted copies of prior lawsuits, police reports, therapist records, and other relevant materials.

Submit Before the Deadline

There are strict deadlines for submitting a Proof of Claim document during a bankruptcy case. You may have between 70 and 90 days to submit this document, and our sexual abuse victim attorneys can determine what the deadline is in your case. If you miss this deadline, you cannot get any compensation from the diocese during the bankruptcy case.

Be Patient

Getting damages from a diocese through a bankruptcy case may take longer than getting damages from a sexual abuse lawsuit, so be prepared. There may be others seeking repayment from the diocese whose debts are prioritized by the court, such as secured lenders. We can keep you updated as the case progresses to minimize re-traumatization.

FAQs About What Happens When a Diocese Declares Bankruptcy During Abuse Litigation

What Happens to an Abuse Lawsuit if a Diocese Declares Bankruptcy?

If a diocese declares bankruptcy during a sexual abuse lawsuit, the lawsuit pauses indefinitely. Instead of seeking damages in civil court, you would seek damages during a bankruptcy case in federal court.

How Often Do Dioceses Declare Bankruptcy During Abuse Litigation?

Declaring bankruptcy has become more common among dioceses with widespread sexual abuse to avoid large, public trials as well as massive settlements and jury awards.

Does a Diocese Declaring Bankruptcy Affect the Statute of Limitations for Abuse Litigation?

A diocese declaring bankruptcy could prevent you from being able to bring abuse litigation before the applicable statute of limitations expires, as no new lawsuits are allowed while an automatic stay is in place.

Can You Still Get Compensation if a Diocese Declares Bankruptcy During Abuse Litigation?

You can still get compensation if a diocese declares bankruptcy during abuse litigation. Instead of coming from a settlement or jury award, the money would be distributed by the trustee of the bankruptcy case.

Can You Petition to Lift the Automatic Stay if a Diocese Declares Bankruptcy?

When victims file successful motions for relief from the automatic stay and the stay gets lifted, they may resume their civil cases and seek compensation as they originally intended. The judge may agree to lift the automatic stay in response to bad-faith filings or to prevent loss of crucial evidence of sexual abuse.

Are Debts Due to Sexual Abuse Dischargeable During Bankruptcy?

Debts arising from sexual abuse are not dischargeable during bankruptcy, as they exist from willful and malicious activity. However, sexual abuse victims are typically not prioritized over secured creditors in bankruptcy cases, so it may take longer to get damages than it would in a sexual abuse lawsuit.

Get Sexual Abuse Damages with Our Help

Call our sexual abuse victim attorneys at (814) 826-3586 for your free case discussion with The Law Office of Andrew Shubin.