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119-s-4346119th CongressWALLET

Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026

Sponsored By: Senator Whitehouse, Sheldon [D-RI]

Introduced

Summary

This bill would prevent abusive Chapter 11 filings by adding hard deadlines, stricter bad‑faith rules, and stronger protections for nondebtor parties.

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  • Debtors and companies: Would impose a 24‑month hard deadline for certain restructuring actions and give courts new grounds to dismiss or convert cases that are objectively futile or filed in subjective bad faith.
  • Creditors and nondebtor parties: Would create a four‑year pre‑petition lookback that shields nondebtors from suits tied to divisional mergers, spinoffs, or similar restructurings and defines "protected claims" to include harms affecting not fewer than 100 individuals.
  • Courts and procedure: Would set legal presumptions and shift burdens, including a rebuttable presumption for manufactured venue, a clear‑and‑convincing standard to overcome certain findings, and a rule that places the burden of proof on the debtor for bad‑faith determinations.

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Bill Overview

Analyzed Economic Effects

3 provisions identified: 1 benefits, 0 costs, 2 mixed.

Broader stay for nondebtor defendants

This bill would create a new automatic stay that can block lawsuits and other actions against some nondebtor companies. The protection would apply when, in the four years before the bankruptcy filing, the debtor was formed or changed through a divisional merger, spinoff, or similar restructuring. The bill would define a "protected claim" to include claims tied to ownership, management, insurance, transaction advice, or to injuries that affect at least 100 people after the filing date. The bill would also stop other courts or rules from issuing orders that override this new stay.

Tougher rules for bad-faith bankruptcies

This bill would give courts clearer tools to dismiss or convert Chapter 11 cases that are objectively futile or filed in bad faith. It would create a conclusive presumption of bad faith if filings aimed to gain a tactical advantage, cause undue delay, or cap liability to two or more creditors holding protected claims. The bill would create a rebuttable presumption that venue was manufactured, require a clear-and-convincing showing to rebut it, and place the burden of proof on the debtor. The bill would also replace the phrase "within a reasonable period" with a fixed 24-month deadline for certain actions listed in the statute.

Confirmed bankruptcy plans preserved

This bill would apply to bankruptcy cases filed or pending on or after enactment. It would not change the validity of any final judgment or order confirming a bankruptcy plan entered before enactment. Parties who relied on confirmed Chapter 11 plans would keep those final orders in place.

Sponsors & CoSponsors

Sponsor

Whitehouse, Sheldon [D-RI]

RI • D

Cosponsors

  • Sen. Hawley, Josh [R-MO]

    MO • R

    Sponsored 4/20/2026

  • Sen. Durbin, Richard J. [D-IL]

    IL • D

    Sponsored 4/20/2026

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
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