What does CONVERSION OR DISMISSAL UNDER CHAPTER 11. of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This section amends Section 1112(b) of Title 11, the United States Code, concerning conversion or dismissal under Chapter 11 bankruptcy. It modifies the timeframe for conversion or dismissal, establishing a deadline of 'not later than 24 months after the date of the filing of the petition'. It adds a new subparagraph (Q) to paragraph (4) allowing dismissal for cases deemed 'objectively futile' or filed 'in subjective bad faith'. The bill establishes presumptions of subjective bad faith if the court determines the debtor 'manufactured the venue for the case'. It creates conclusive presumptions of subjective bad faith based on factors such as gaining a tactical litigation advantage, imposing undue delay on creditors, limiting liability to specific creditors, corporate structure changes, asset transfers to insiders, or lacking a valid reorganizational purpose. The court must consider the support of an appointed creditors' committee when determining if a debtor lacks a valid reorganizational purpose. The debtor bears the burden of proof in determinations under subsections (g) and (h).

What does LIMITATIONS ON CERTAIN STAYS AND INJUNCTIONS. of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This section amends Section 105 of Title 11 of the United States Code. The amendment adds a new subsection (e) to Section 105. Under the new subsection (e), courts may not issue orders that override or nullify Section 362(b)(27) of Title 11. This limitation applies regardless of provisions in Title 28, the Federal Rules of Bankruptcy Procedure, or other non-bankruptcy laws.

What does TECHNICAL AMENDMENTS. of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This section makes technical amendments to several sections of title 11, United States Code, relating to bankruptcy. Section 553 is amended to replace references to '362(b)(27)' with '362(b)(28)' in subsections (a)(2)(B)(ii), (a)(3)(C), and (b)(1). Section 1519(f) is amended to replace ' (27)' with ' (28)'. Section 1521(f) is amended to replace ' (27)' with ' (28)'. These amendments appear to be corrections or updates to existing code references.

What does APPLICATION AND RULE OF CONSTRUCTION. of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This Act applies to cases under title 11 of the United States Code that were filed or were pending on or after the date of enactment. The Act does not affect the validity of any final judgment or order confirming a plan under chapter 11 of title 11 that was entered before the date of enactment.

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Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026

Q: What does Preamble of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This bill proposes to amend title 11 of the United States Code, which pertains to bankruptcy. The proposed amendment would allow for the dismissal of a Chapter 11 bankruptcy case if the filing is deemed objectively futile or in subjective bad faith. The bill's stated purpose is to amend title 11, United States Code, regarding Chapter 11 bankruptcy petitions.

Q: What does SHORT TITLE. of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This bill is formally titled the Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026.

Q: What does AUTOMATIC STAY. of Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 do?

This section amends Section 362 of Title 11 of the United States Code, which concerns the automatic stay in bankruptcy proceedings. It redesignates existing paragraphs within subsection (b) of Section 362. A new paragraph (27) is inserted to extend the automatic stay to actions against non-debtor entities under specific circumstances. This extension applies when the debtor, within four years prior to filing the petition, was involved in a divisional merger, spinoff, corporate restructuring, or similar transaction affecting their financial condition. A new paragraph (p) is added to define 'protected claim' for the purposes of paragraph (27). A 'protected claim' is defined as a claim against a non-debtor entity or their property, linked to the debtor through ownership, management involvement, insurance, or transactions affecting the debtor's financial condition. The definition of 'protected claim' also includes claims related to injury, contamination, or loss affecting at least 100 individuals, potentially arising from products or substances associated with the debtor. The term 'related party' is defined by reference to Section 524(g)(4)(A)(iii).

Last updated: 4/20/2026 · Introduced: 4/20/2026

Author: Emilia Sykes (D-OH)

TL;DR (AI)

This bill allows bankruptcy courts to dismiss Chapter 11 cases deemed objectively futile or filed in subjective bad faith, establishing specific presumptions of bad faith related to venue manipulation and strategic actions.
The bill limits courts' ability to override the automatic stay's protection of certain assets, regardless of procedural rules or other laws.
It expands the automatic stay to protect claims against non-debtor entities connected to the debtor through various relationships, including corporate transactions, ownership, and claims affecting a significant number of individuals.

119th Congressin committeeS. 4346(In Committee)Official page

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Includes provisions on preamble, short title., and 5 more.

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