Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026

Key Points

• This bill lets judges throw out Chapter 11 bankruptcy cases that are filed in bad faith or are objectively futile. It creates new grounds for dismissal when companies abuse bankruptcy to dodge legitimate legal claims from people they have harmed.
• The bill directly targets the controversial "Texas Two-Step" tactic, where a company splits itself in two and puts all its legal liabilities into one shell company that then files for bankruptcy. If a company went through a divisional merger or similar restructuring in the four years before filing, the court must conclusively presume bad faith.
• The bill protects large groups of people suing companies for injuries caused by products or exposure to harmful substances. It prevents parent companies from using a subsidiary's bankruptcy to freeze lawsuits against the entire corporation when 100 or more individuals are affected.
• If a company has enough money to pay its debts but files for bankruptcy anyway to cap what it owes victims, the court must treat that as conclusive bad faith. Companies also cannot use bankruptcy to gain a tactical litigation advantage or impose undue delay on creditors.
• The bill sets a hard deadline: Chapter 11 cases must file a reorganization plan within 24 months of the petition date, replacing the previous vague requirement of a "reasonable period of time." This prevents companies from dragging out bankruptcy proceedings indefinitely.