Sponsors (4)
The bill tightens rules to curb venue abuse and expose nondebtor wrongdoers—giving creditors and victims more immediate remedies and predictability—at the cost of higher litigation risks, reduced judicial flexibility, and pressure on legitimate reorganizations that may harm debtors, employees, and increase costs for nondebtor parties.
Creditors (banks, bondholders, official committees) gain faster ability to seek dismissal or conversion of chapter 11 cases and face stronger limits on "manufactured" venue, giving them quicker certainty and better protection of recoveries.
Victims and claimants (including large groups of ≥100) can pursue claims against nondebtor parties (insurers, parents, officers) sooner and more directly rather than being blocked by the debtor's bankruptcy shield, potentially speeding compensation.
The law prevents debtors from insulating insiders or assets through recent divisional mergers or avoidable transfers, reducing a common abuse and protecting creditor recoveries.
Debtors (especially small businesses) face a stricter standard, a shifted burden of proof, conclusive presumptions, and a hard 24‑month deadline that can force premature conversion or liquidation, increasing litigation costs and risking job losses.
Expanding exceptions to the automatic stay and allowing suits against nondebtor affiliates increases litigation risk and liability for insurers, parent companies, and officers, raising legal costs that may be passed to consumers or taxpayers and discouraging corporate reorganizations.
Restricting courts' equitable powers and barring them from using other procedural authorities removes a judicial safety valve, which may prevent judges from crafting narrow remedies for unforeseen problems and could increase litigation and error costs.
Based on analysis of 6 sections of legislative text.
Tightens chapter 11 bad‑faith standards, sets a 24‑month benchmark, and creates an automatic‑stay exception allowing suits against certain nondebtor affiliates after 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 convert or dismiss chapter 11 cases that are filed or continued in bad faith, sets a 24-month limit for reorganization efforts, and creates new rules that let certain claims against nondebtor affiliates proceed despite the automatic stay. It also bars courts from using equitable powers to nullify the new exception to the automatic stay and applies these rules to cases filed or pending on or after the law's enactment. The bill defines when a case is presumed to be in bad faith (including a conclusive list of indicia), shifts some burdens of proof to the debtor, defines “protected claims” that may be pursued against nondebtors after corporate restructurings or divisional transactions, and makes technical renumbering fixes in the bankruptcy code.