Sponsors (3)
Official title: 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 Sheldon Whitehouse · Last progress April 20, 2026
The bill aims to speed bankruptcy finality, curb abusive filings, and preserve certain statutory safe harbors while expanding victims' ability to sue nondebtors — but it tightens procedural rules in ways that may hasten liquidations, increase litigation and insurance costs, and limit judges' flexibility to tailor equitable relief.
Financial institutions, government contractors, creditors, and other parties gain clearer, more predictable legal boundaries because the bill preserves the §362(b)(27) safe harbor and explicitly clarifies that certain new rules apply to pending and future cases, reducing uncertainty about which rules govern ongoing proceedings.
Creditors, financial institutions, and some small-business stakeholders benefit from faster resolution of chapter 11 cases because courts must convert or dismiss cases within 24 months, shortening prolonged restructurings and accelerating recoveries or finality.
Claimants injured by mass harms (100+ people) and other victims can pursue recovery against nondebtor owners, managers, and insurers more readily, allowing mass‑injury claims to proceed outside the bankruptcy stay and speeding access to compensation.
Small businesses and other debtors face a higher risk of forced liquidation because the mandatory 24‑month convert-or-dismiss timeline can cut off reorganizations that legitimately need more time to implement viable plans.
Legitimate debtors may face higher litigation costs and reduced access to relief because the bill creates strong evidentiary presumptions and conclusive burdens that make it harder to overcome dismissal or bad‑faith challenges.
Debtors, affiliated nondebtor entities, insurers, and guarantors could face immediate surges in lawsuits after restructuring, increasing legal and insurance costs for businesses and potentially translating into higher prices or reduced coverage for consumers.
Based on analysis of 6 sections of legislative text.
Tightens Chapter 11: mandates 24‑month timing for dismissal/conversion, creates bad‑faith presumptions, shifts burdens to debtors, and limits the automatic stay for claims tied to recent restructurings.
Creates new limits and presumptions in Chapter 11 bankruptcy that make it faster and harder for some debtors to remain in bankruptcy. It sets a 24‑month limit for conversion or dismissal timing, creates rebuttable and conclusive presumptions of subjective bad faith (including for certain venue manipulations and recent corporate restructurings), requires the debtor to carry the burden of proof on those issues, and adds an exception to the automatic stay that allows claims against nondebtors tied to corporate-structure changes within four years before filing. It also bars courts from using other authorities to nullify that new stay exception and applies these rules to cases filed or pending on or after enactment (without disturbing prior final plan confirmations).