The Boy Scouts of America is pushing to exit bankruptcy after seeking chapter 11 protection last year from a growing number of sex-abuse claims. The bankruptcy case, which spotlighted past failures by the organization to protect children, may be nearing its end as a settlement offer gains momentum. The youth group has said it needs to make peace with sex-abuse victims for its mission to survive. Here’s what you should know about the chapter 11 case, the largest ever filed over sexual abuse, and what could happen next:

Why did the Boy Scouts file for bankruptcy?

Sex-abuse claims dogged the Boy Scouts for years, especially after a court-ordered release in 2012 of internal files on reports of abuse by volunteers. The youth group turned to bankruptcy when states including New York, New Jersey and California suspended statutes of limitations on abuse claims, opening the door to lawsuits alleging childhood trauma regardless of when it happened.

The Boy Scouts filed for chapter 11 protection in February 2020 amid intensifying legal pressure over alleged abuse and with billions of dollars of land, buildings, cash and investments to protect. Bankruptcy halts pending lawsuits and offers a way to negotiate settlements with large numbers of individual claimants.

The chapter 11 filing covered the national Boy Scouts organization headquartered in Irving, Texas, but excluded roughly 250 affiliated local councils across the U.S. that hold the bulk of the 111-year-old institution’s wealth, much of it in property holdings. Part of the chapter 11 strategy was to blunt the financial consequences of sex-abuse litigation for the local councils, which are chartered by the Boy Scouts to administer scouting programs.

When the bankruptcy began, the Boy Scouts reported roughly 275 pending lawsuits alleging sexual misconduct by employees or volunteers, and roughly 1,400 other known abuse claims. The number of claims ballooned to 82,500 after the youth group urged abuse victims to step forward and file claims by a bankruptcy-court deadline last year.

Reaching a financial settlement will help preserve the mission of the Boy Scouts, according to the youth group, which has also apologized to victims.

What have the Boy Scouts proposed?

The Boy Scouts’ offer to survivors consists of a $250 million contribution of cash, artwork, property and other assets, accompanied by up to $600 million from the local councils. The youth group would also sign over decades’ worth of insurance rights to a compensation trust, set up for the benefit of victims. The trust would value claims and administer payouts, while pursuing as much insurance coverage as possible under the Boy Scouts’ old policies.

The initial funding of $850 million would rank among the largest ever sex-abuse settlements. But survivors are counting on insurance to close the gap between that $850 million and the total abuse liabilities, estimated by the Boy Scouts at between $2.4 billion and $7.1 billion.

The settlement proposal includes a compensation program under which claims would be valued and paid after the bankruptcy ends. Claim values vary depending on the severity of the alleged abuse, ranging from $3,500 for misconduct that involved no touching up to $2.7 million for sexual penetration by an adult and other aggravating circumstances.

Payouts would also depend on where the abuse occurred. Claimants in states with plaintiff-friendly laws will get more than those in states with strong defenses to liability. Of the 82,500 claims, 14,000 identify alleged abusers by name and would be currently enforceable in state courts, as only some states have lifted or suspended the statute of limitations for abuse going back years or decades, according to lawyers for victims opposing the settlement.

Who supports the Boy Scouts’ plan?

Lawyers for roughly 70,000 of the men who filed claims support the Boy Scouts’ settlement offer and have agreed to recommend they vote for it. In exchange, the Boy Scouts will submit that framework for court approval and won’t alter it without survivors’ permission. The judge overseeing the Boy Scouts’ bankruptcy mostly approved the arrangement in August as a sound exercise of business judgment.

Local councils have also signaled support for the settlement, provided they are released from all liability for alleged sexual abuse.

Bankruptcy courts can settle and release legal claims against parties not in chapter 11, though the practice is controversial when creditors don’t all agree on settlement terms.

Who is against the bankruptcy plan and why?

Law firms representing a minority of victims have taken issue with the Boy Scouts’ strategy, arguing that local councils aren’t offering enough of their assets. The firms have also said their clients won’t get enough upfront cash and must rely on the outcomes of insurance disputes for much of their recoveries.

Insurers for the Boy Scouts, meanwhile, are nearly unified in opposition. Insurance carriers led by Chubb Ltd. ’s Century Indemnity Co. and Hartford Financial Services Group have said the bankruptcy plan would strip them of their rights to contest coverage and could leave them on the hook for paying inflated claim values.

Hartford and Century have questioned whether thousands of abuse claims filed against the Boy Scouts are legitimate, pointing to evidence they gathered that some lawyers for victims had signed papers attesting to the truthfulness of hundreds of such claims in a single day.

The insurers have sought bankruptcy court permission to further investigate whether claims were sufficiently vetted. Lawyers for victims have said it isn’t surprising so many people came forward when abuse occurred on a national scale over decades.

Hartford also opposes the bankruptcy plan because it would discard a $650 million deal the insurer reached with the Boy Scouts in April to buy back its policies. Abuse victims said they would never support that deal, which they considered flawed, and persuaded the Boy Scouts to try to walk away from it. Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., hasn’t decided whether the Boy Scouts can repudiate the deal or if it is still binding on the parties.

What will happen next?

The Boy Scouts still need Judge Silverstein to approve its chapter 11 plan disclosures, which would give victims and other creditors enough information to vote to accept or reject the plan. Insurance companies or other objecting parties would have the opportunity to contest confirmation of the plan if they can’t reach settlements first.

What happens if the bankruptcy plan fails?

The settlement is a cornerstone of a broader plan by the Boy Scouts to end its bankruptcy case. If the settlement collapses or is rejected in court, victims who stepped forward at the Boy Scouts’ request would face new risks to their compensation.

A contingency plan drawn up by the Boy Scouts would resolve sex-abuse liabilities only for the national organization, leaving local councils open to abuse claims. The Boy Scouts believe such a plan could more easily pass legal muster, because no parties other than the national organization would have liabilities discharged. If that were to happen, some local councils could be expected to file their own chapter 11 cases, according to court papers.

Without a global resolution victims would be “forced to revert to the tort system and likely into bankruptcy courts across the country as local councils confront a tidal wave of abuse lawsuits,” according to the Boy Scouts.

Write to Becky Yerak at becky.yerak@wsj.com and Soma Biswas at soma.biswas@wsj.com