Closing Bankruptcy Loopholes for Child Predators Act of 2026
- Sponsor
- Rep. Ross, Deborah K. [D-NC-2]
- Committees
- Judiciary Committee (primary)
- Last action
- Apr 29, 2026
Bottom line
The bill aims to enhance accountability for child sex abuse and empower victims within bankruptcy proceedings by closing perceived legal loopholes and increasing transparency.
What it actually does
This bill amends Title 11 of the U.S. Code (Bankruptcy Code) and the Federal Rules of Bankruptcy Procedure to strengthen protections for child sex abuse victims in bankruptcy cases. It defines 'sexual abuse of a child,' mandates victim impact statements, restricts the sealing of evidence, exempts child sex abuse claims from automatic stays, and significantly tightens rules for third-party releases and the dischargeability of debts related to child sexual abuse, particularly for non-profit organizations.
Proponents argue
Proponents argue that the bill closes critical loopholes in bankruptcy law that have historically allowed individuals and organizations responsible for child sex abuse to shield assets, avoid accountability, and silence victims. They contend it ensures victims have a stronger voice, prevents the sealing of crucial evidence, and makes it more difficult for third parties connected to abuse to escape liability through bankruptcy reorganization plans.
Opponents contend
Potential opponents might argue that some provisions, particularly those related to third-party releases and the definition of 'gross negligence,' could create legal uncertainty, complicate legitimate bankruptcy reorganizations for non-profit organizations, and potentially lead to an increase in litigation costs. They might also raise concerns about the retroactive application of certain provisions or the impact on the ability of institutions to recover financially.
The bill is moderately complex due to its legal nature, requiring careful reading to understand the specific amendments to bankruptcy law. The time given for analysis is adequate for an informed reader.
Section 2(a)(1)
Defines 'sexual abuse of a child'
This provision adds a new definition to the Bankruptcy Code, specifying what constitutes 'sexual abuse of a child.' It references various federal criminal statutes related to sexual exploitation, abuse, and trafficking, as well as similar non-federal laws, and clarifies that the conduct must have aggrieved a person who was a minor at the time.
Supporters argue
Supporters argue that a clear, comprehensive definition is essential to ensure consistent application of the law and to prevent debtors from exploiting ambiguities to avoid liability.
Critics contend
No specific opposition is typically raised against defining terms clearly, though debates might arise over the scope of included statutes.
Tradeoffs
Balances the need for clarity with the potential for overly broad or narrow interpretations.
Section 2(a)(2) and (3)
Mandates Victim Impact Statements in Child Sex Abuse Cases
This provision requires bankruptcy courts to hold a conference within 60 days of the claims deadline in child sex abuse cases to consider victim impact statements. It defines these statements as voluntary written, oral, video, or audio submissions describing the emotional, physical, familial, or financial impact of the abuse. Crucially, it states these statements are solely for engagement and understanding, and cannot be used as evidence.
Section 2(a)(4)
Mandates Independent Forensic Accountant Review for Non-Profit Debtors
For bankruptcy cases involving debts from child sex abuse allegations against 501(c)(3) organizations, this provision requires the court to engage an independent forensic accountant. This accountant will review the debtor's assets and interests, as well as those of any non-debtor sought to be released from liability, to ensure proper inclusion or exclusion from the bankruptcy estate.
Section 2(a)(5) and Section 3(2)
Limits Sealing of Evidence in Child Sex Abuse Cases
This provision amends both the Bankruptcy Code (Section 107) and the Federal Rules of Bankruptcy Procedure (Rule 9018) to prohibit court orders from sealing any evidence of alleged crimes relating to child sexual abuse. The only exception is to protect the identity and personal information of the alleged victim, unless the alleged offender is found not guilty in a court of law.
Section 2(a)(6)
Exempts Child Sex Abuse Claims from Automatic Stay
This amendment adds claims concerning the sexual abuse of a child or related claims to the list of exceptions to the automatic stay in bankruptcy. This means that legal actions related to child sex abuse can continue or be initiated even while a bankruptcy case is ongoing, rather than being paused by the bankruptcy filing.
Section 2(a)(7)
Stricter Requirements for Third-Party Releases in Child Sex Abuse Cases for Non-Profits
This provision significantly tightens the rules for third-party releases in child sex abuse cases, especially for 501(c)(3) organizations. It requires affirmative consent from both the debtor and at least 90% of voting creditors for any third-party release. It also mandates that third parties seeking release provide sufficient information for creditors to make an informed decision. For 501(c)(3) debtors, it raises the voting threshold for a plan involving a trust for child sex abuse claims from 75% to 90% of voting claimants in a separate class. It also clarifies that an affiliate of the debtor can be a third party.
Section 2(a)(8)
Deems Child Sex Abuse Claims Timely Filed Regardless of State Statute of Limitations
This provision states that claims relating to the sexual abuse of a child are deemed timely filed in bankruptcy proceedings, regardless of any otherwise applicable State statute of limitations. This effectively overrides state-level time limits for bringing such claims within a bankruptcy context.
Section 2(a)(9)
Prevents Discharge of Debts Arising from Child Sex Abuse for Responsible Parties
This provision amends Section 523(a)(20) to prevent any debtor (individual, corporation, non-profit, or other entity) from receiving a discharge in bankruptcy for claims or debts arising from the sexual abuse of a minor if the debtor was directly responsible for the abuse or acted with gross negligence for the safety of the abused minor(s). This applies across various bankruptcy chapters.
Section 2(a)(10)
Prohibits Subchapter V Filings for Child Sex Abuse Claims
This provision explicitly prohibits debtors from using Subchapter V of Chapter 11 (a streamlined bankruptcy process for small businesses) for claims arising from or related to child sexual abuse.
Section 3(1)
Expands Scope of Rule 2004 Examinations in Child Sex Abuse Cases
This amendment expands the scope of Rule 2004 examinations (a broad discovery tool in bankruptcy) in Chapter 11 child sex abuse reorganization cases. The examination must now specifically relate to abuse allegations, remedial policies, responses to allegations, debtor finances and projections, and any other matter relevant to the case or plan formulation. It also mandates debtor attendance and production of documents/electronically stored information.
For 501(c)(3) organizations filing for Chapter 11 to resolve child sex abuse claims, a plan that addresses claims through a trust requires at least 90% of a separate class of claimants (those whose claims are addressed by the trust) to vote in favor of the plan. This is a significant increase from the general 75% threshold.
Section 2(a)(7)(C)(ii) amending 524(g)(2)(B)(IV)(bb)
Why it matters:This is standard legislative practice for amending specific parts of a complex statute. The detail is crucial for the affected parties.
Case for: Proponents argue this high threshold is necessary to ensure that a vast majority of victims agree to the terms of a reorganization plan that includes third-party releases, preventing a small majority from imposing terms on a significant minority. It empowers victims.
Case against: Opponents might argue that achieving a 90% affirmative vote from a potentially large and diverse group of victims is an exceptionally high bar, making successful reorganization for these institutions nearly impossible and potentially leading to liquidation, which might yield less for victims.
Estimated impact: Significantly impacts the feasibility of Chapter 11 reorganizations for 501(c)(3) organizations facing child sex abuse claims, potentially leading to fewer successful reorganizations and more liquidations.
Debts arising from child sex abuse are non-dischargeable if the debtor was 'directly responsible' or 'acted with gross negligence for the safety of the abused minor(s).'
Section 2(a)(9) amending 523(a)(20)
Why it matters:This is standard legal drafting, using precise legal terms within a complex amendment.
Case for: Proponents argue that institutions that fail to protect children through gross negligence should not be allowed to escape financial liability through bankruptcy. This holds organizations accountable for systemic failures.
Case against: Opponents might argue that 'gross negligence' can be a subjective standard, potentially leading to extensive litigation to determine its applicability and making it difficult for institutions to predict their liability. This could broaden the scope of non-dischargeable debts beyond direct perpetrators in an unpredictable way.
Estimated impact: Significantly expands the scope of non-dischargeable debts to include institutional failures, not just individual perpetrators, potentially increasing the financial exposure of organizations.