Sponsors (4)
This bill shifts power and predictability toward creditors and enables claimants to pursue nondebtor defendants sooner, but does so by raising legal burdens on debtors, restricting judicial flexibility, increasing litigation exposure for nondebtor entities, and creating risks of premature liquidations and higher costs for businesses and taxpayers.
Creditors, lenders, and other financial stakeholders can more quickly seek dismissal or conversion of lengthy Chapter 11 cases, prevent forum-shopping, and rely on clearer statutory rules, reducing delay and increasing predictability for financial creditors.
People harmed by mass exposures and other claimants can pursue lawsuits directly against nondebtor parties (insurers, corporate parents, officers) without the debtor's bankruptcy automatically shielding those defendants, which can speed compensation for large groups of victims.
Debtors and creditors get clearer rules about when the law applies to cases filed or pending after enactment and confirmation orders entered before enactment remain final, reducing some disputes about retroactivity and reliance interests.
Small businesses and other legitimate debtors face a higher legal standard (clear-and-convincing) and shifted burdens, plus conclusive presumptions and a hard 24-month deadline, increasing litigation costs and risking premature liquidation or loss of value from reorganizations.
Restricting courts' equitable powers and imposing conclusive presumptions removes a judicial safety valve, reducing judges' ability to craft narrow remedies in complex cases and increasing the risk of unjust or inflexible outcomes and prolonged disputes.
Insurers, corporate parents, and officers face increased litigation exposure and liability tied to recent spinoffs or divisional mergers, raising legal and insurance costs that could be passed on to consumers or taxpayers and discouraging certain reorganizations.
Based on analysis of 6 sections of legislative text.
Tightens Chapter 11 bad-faith standards with a 24-month clock, creates presumptions of bad faith for certain venue/restructuring tactics, and carves out a stay exception protecting certain nondebtor claims tied to recent restructurings.
Official title: To amend title 11, United States Code, to make the filing of a petition for relief under chapter 11 that is objectively futile or in subjective bad faith a cause for dismissal of the case, and for other purposes.
Introduced April 20, 2026 by Emilia Strong Sykes · Last progress April 20, 2026
Changes bankruptcy law to make it easier to dismiss or convert Chapter 11 cases that courts find were filed or continued in bad faith, and to protect certain nondebtor entities from bankruptcy stay relief and related court orders. It creates specific deadlines, new presumptions of bad faith, a narrow automatic-stay exception for claims against nondebtors tied to recent corporate restructurings, and limits courts’ authority to override that exception.