Boy Scouts of America filed for bankruptcy after a flood of sex abuse cases, reports of declining membership and legal battles with insurance companies. What's next for local Scouts?

The national Boy Scouts of America filed for bankruptcy protection early Feb. 18 amid membership losses and years of child sexual abuse allegations.

The Chapter 11 filing, made in Delaware Bankruptcy Court overnight, could change the dynamic for abuse survivors who have yet to come forward. It’s unprecedented in terms of its scope and complexity. The first hearing was scheduled in Wilmington on Feb. 19 at 10:30 a.m.

“They’re going into bankruptcy not because they don’t have the money,” said Tim Kosnoff, an attorney who has tried thousands of child abuse cases against the Boy Scouts and the Catholic Church. “They’re going into bankruptcy to hide ... a Mount Everest in dirty secrets.”

In a statement, Boy Scouts of America said it intends to use the bankruptcy process to create a victims’ compensation trust that would “provide equitable compensation to victims.”

The Boy Scouts organization faces hundreds, if not thousands, of abuse lawsuits. The organization was valued at $1.4 billion in 2018 tax documents, in large part due to its collection of historic properties and cultural relics.

Many saw the Scouts’ increase in annual membership fees in October, from $33 to $60, as a sign of financial trouble linked its increasing number of legal disputes.

The organization has been mired in civil litigation since a landmark case in 2010 resulted in $19.9 million in damages. The case triggered the release of more than 20,000 confidential documents, which became known as the “perversion files.”

The records named more than 1,000 banned volunteers, including more than 20 from Delaware, according to a Los Angeles Times database.

Files ranging from 1960 to 2004 detail cases of molestation, unlawful sexual contact and sexual assault in Delaware. At least one man, Eric D. Robbins, was not reported to authorities after allegations of sexual abuse.

The Del-Mar-Va Council of the Boys Scouts of America, the regional council to which all Delaware troops belong, did not immediately respond to requests for comment.

In its statement, the national organization said local scouting programs will continue. The Boy Scouts operate on a decentralized structure in which the national body serves an advisory role while much of the day-to-day operations occur at the local level.

Part of the bankruptcy proceedings will likely revolve around whether the Boy Scouts will be forced to sell off assets controlled by local and regional councils. The Boy Scouts are likely to argue that assets such as property owned by local troops are separate and should be left untouched.

The Del-Mar-Va Council operates the Akridge Scout Reservation in Dover and has a shop and customer service center at the Wilmington Riverfront.

In one of several moves to signal an emphasis on inclusion, the Boy Scouts announced in 2017 that the organization would welcome girls.

According to Girl Scouts of the Chesapeake Bay spokeswoman Liz Farrell, the decision hasn’t significantly affected Girl Scouts, which remains strong financially.

The Girl Scouts sued the Boy Scouts, claiming trademark infringement, after the Boy Scouts announced it would drop “Boy” from its name as part of the move.

“Girl Scouts of the USA will work through the bankruptcy process to protect our trademark rights and pursue our infringement claims against Boy Scouts of America,” the national organization said in a statement.

In 2019, financial threats to the Boy Scouts have intensified as multiple states consider adjusting their statute-of-limitations laws so victims of long-ago child sex abuse have a chance to seek redress in the courts.

By filing for bankruptcy now, the Boy Scouts can consolidate all the lawsuits against them and pursue a settlement that potentially is far lower than settlements outside bankruptcy.

The benefit for survivors who have filed suit recently, according to Indiana University law professor Pamela Foohey, is that they avoid a prolonged legal battle.

Typically, abuse survivors will be represented on a required committee of unsecured creditors or on a separate committee established to represent their interests, she said. The committee will try to negotiate a settlement in which the nonprofit sets aside a pot of money to settle claims.

To gain access to those funds, survivors will have to file a claim by a date set by the bankruptcy judge. Critics say that process can be stacked in favor of the organization by forcing victims who may not be ready to come forward to file their claims. It also eschews recent efforts by several states to expand the statute of limitations.

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Contact Brandon Holveck at bholveck@delawareonline.com or at (302) 324-2267. Follow on Twitter @holveck_brandon. Jessica Bies contributed to this report.