Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026
Sponsored By: Representative Sykes, Emilia Strong [D-OH-13]
Introduced
Summary
Strengthen gatekeeping over Chapter 11 filings. This bill would set firm deadlines and new bad-faith tests to stop tactical or manufactured bankruptcies and to limit bankruptcy shields for related third parties.
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- Debtors: Courts could dismiss or convert cases deemed 'objectively futile' or filed in 'subjective bad faith.' Petitioners would face a firm 24-month deadline to seek dismissal or conversion and new presumptions mean the debtor often must prove good faith, including a permissive presumption if the court finds the debtor manufactured venue and conclusive presumptions for certain tactical restructurings.
- Nondebtor affiliates and third parties: The automatic stay would extend to certain actions against nondebtors when a debtor or affiliate underwent a divisional merger, spinoff, or restructuring within four years. 'Protected claims' include allegations tied to management roles, ownership interests, insurance, transfers that could be avoided, and claims involving injury or product exposure affecting not less than 100 individuals.
- Creditors and courts: The bill directs courts to consider committee support when assessing bad faith and shifts burdens of proof onto debtors in many cases. It also bars court orders that would override the new stay protections tied to protected claims, tightening judicial discretion in these disputes.
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Bill Overview
Analyzed Economic Effects
2 provisions identified: 0 benefits, 0 costs, 2 mixed.
Tighter Chapter 11 rules for businesses
If enacted, the bill would limit motions to convert or dismiss a Chapter 11 case to 24 months from filing. It would let courts dismiss filings that are "objectively futile" or in "subjective bad faith." The bill would create presumptions: manufactured venue raises a bad-faith presumption rebuttable only by clear and convincing evidence. It would also create a conclusive bad-faith presumption for certain tactics, transfers, and restructurings within four years. Debtors would carry the burden to prove good faith, and courts must consider creditor committee support. The rules would apply to Chapter 11 cases filed or pending on enactment.
New bankruptcy stay for nondebtor companies
If enacted, the bill would add a new bankruptcy stay protecting some nondebtor companies from certain lawsuits. The stay would apply when the debtor had a divisional merger, spinoff, or similar restructuring within four years before filing. A "protected claim" includes claims against nondebtors for management, ownership, insurance, or involvement in the restructuring. It would also cover mass-injury product or contamination claims affecting at least 100 people after filing. Courts would be barred from issuing orders that override this new stay. These rules would apply to Chapter 11 cases filed or pending on enactment.
Sponsors & CoSponsors
Sponsor
Sykes, Emilia Strong [D-OH-13]
OH • D
Cosponsors
Rep. Gooden, Lance [R-TX-5]
TX • R
Sponsored 4/20/2026
Rep. Nadler, Jerrold [D-NY-12]
NY • D
Sponsored 4/20/2026
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov