Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026

Key Points

• This bill targets companies that abuse Chapter 11 bankruptcy to dodge liability to people they have harmed. It adds new grounds for dismissal when a bankruptcy filing is "objectively futile" or made in "subjective bad faith," meaning companies with enough money to pay victims can no longer use bankruptcy as a shield.
• The bill directly targets the "Texas Two-Step" maneuver, where a company splits itself through a divisional merger, loads all its legal liabilities onto one entity, and sends that entity into bankruptcy. If a company did a divisional merger or similar restructuring within 4 years before filing, the court will conclusively presume bad faith.
• Bankruptcy judges would be blocked from issuing orders that protect non-debtor parent companies or affiliates from lawsuits by victims. This is especially important in mass tort cases involving at least 100 injured people, like those harmed by dangerous products or toxic substances.
• Cases must reach a plan confirmation within 24 months of filing, replacing the vague "reasonable period of time" standard. This prevents companies from dragging out bankruptcy proceedings to exhaust creditors and victims financially.
• The law applies to both new bankruptcy cases and cases already pending when it takes effect. However, it does not undo any final judgments or confirmed reorganization plans that were entered before enactment, preserving the finality of completed cases.