Sponsors (3)
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
This bill tilts bankruptcy rules toward faster creditor remedies and greater access for victims to sue nondebtors, improving predictability for some stakeholders while raising litigation burdens, reducing judicial flexibility, and risking premature liquidations or lower recoveries in complex reorganizations.
Creditors (banks, bondholders, committees) can seek dismissal or conversion more quickly because chapter 11 reorganizations are subject to a 24‑month deadline, speeding creditor recoveries and reducing prolonged cases.
People injured by mass harms (groups of 100+) and other claimants can pursue responsible nondebtor entities (insurers, parents, officers) sooner and more directly because certain bankruptcy shields for nondebtors are limited.
Courts are better able to stop forum‑shopping and tactical filings — and dismissal decisions will more clearly reflect creditor committee support — which protects creditor recoveries and reduces abusive filings.
Debtors (including small businesses) face a higher litigation burden because the bill shifts the burden of proof and imposes a stricter (clear-and‑convincing) standard to rebut allegations of manufactured venue or transfers, increasing legal costs and risk of dismissal.
A hard 24‑month deadline for reorganizations can force premature conversion or liquidation in complex cases that reasonably need more time, risking lost value and job losses for employees of reorganizing firms.
Nondebtor entities (insurers, parent companies, officers) face greater exposure to litigation even when a related debtor files bankruptcy, increasing legal liability and costs that may be passed on to consumers or taxpayers and discouraging certain restructurings.
Based on analysis of 6 sections of legislative text.
Shortens some Chapter 11 timelines, expands bad‑faith dismissal rules, and creates a stay‑exception protecting certain nondebtors after recent corporate restructurings.
Changes to bankruptcy law that make it easier for courts to dismiss or convert chapter 11 cases that are delayed or filed in bad faith, and that narrow bankruptcy automatic-stay protections for some nondebtor affiliates after recent corporate restructurings. It creates new time limits, presumption rules, and definitions of “protected claims,” and prevents courts from using broad equitable powers to ignore those new stay exceptions. The rules apply to cases filed or pending on or after enactment and preserve existing confirmed plans entered before enactment.