H.R. 8393

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8393 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 8393

To amend title 11, United States Code, to make the filing of a petition 
for relief under chapter 11 that is objectively futile or in subjective 
bad faith a cause for dismissal of the case, and for other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

April 20, 2026

Mrs. Sykes (for herself, Mr. Gooden, and Mr. Nadler) introduced the 
following bill; which was referred to the Committee on the Judiciary

_______________________________________________________________________

A BILL

To amend title 11, United States Code, to make the filing of a petition 
for relief under chapter 11 that is objectively futile or in subjective 
bad faith a cause for dismissal of the case, and for other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Consumer Protection and Corporate 
Accountability in Bankruptcy Act of 2026''.

SEC. 2. CONVERSION OR DISMISSAL UNDER CHAPTER 11.

Section 1112(b) of title 11, United States Code, is amended--
(1) in paragraph (2)(A), by striking ``within a reasonable 
period of time'' and inserting ``not later than 24 months after 
the date of the filing of the petition'';
(2) in paragraph (4)--
(A) subparagraph (O), by striking ``and'' at the 
end;
(B) in subparagraph (P), by striking the period at 
the end and inserting ``; and''; and
(C) by adding at the end the following:
``(Q) with respect to the dismissal of a case under this 
chapter, the filing of a petition for relief or the 
continuation of a case under this title that is--
``(i) objectively futile; or
``(ii) in subjective bad faith.''; and
(3) by adding at the end the following:
``(g)(1) For the purpose of subsection (b)(4)(Q), the court shall 
presume that a petition has been filed or that a case is continuing 
under this title in subjective bad faith if the court determines that 
the debtor manufactured the venue for the case.
``(2) The presumption under paragraph (1) may be rebutted only 
based on clear and convincing evidence.
``(h)(1) For the purpose of subsection (b)(4)(Q), the court shall 
conclusively presume that a petition has been filed or that a case 
under this title that is continuing in subjective bad faith if the 
court determines that--
``(A) a purpose or effect of the filing or continuation is 
to--
``(i) gain a tactical litigation advantage;
``(ii) impose undue delay upon creditors; or
``(iii) cap the total amount of the liability of 
the debtor to 2 or more creditors holding protected 
claims (as defined in section 362(p)(1)) that the 
debtor or any affiliate has property of value 
sufficient to pay in full as those claims would come 
due;
``(B) during the 4-year period preceding the date of the 
filing of the petition, the debtor was the subject of, or was 
formed or organized in connection with, a divisional merger or 
similar transaction changing the corporate structure of and 
affecting the financial condition of the debtor or an 
affiliate;
``(C) during the 4-year period preceding the date of the 
filing of the petition, the debtor engaged in a transfer of 
substantial assets to or for benefit of or incurred substantial 
obligations from or for the benefit of any insider or affiliate 
that, notwithstanding subsections (e) through (g) and (j) of 
section 546, is avoidable under section 544(b) or subsection 
(a)(1) or (e) of section 548; or
``(D) the debtor does not have a valid reorganizational 
purpose.
``(2) In making a determination under paragraph (1)(D), the court 
shall consider and give weight to whether any appointed creditors' 
committee supports the dismissal of the case.
``(i) In a determination under subsection (g) or (h), the debtor 
shall have the burden of proof.''.

SEC. 3. LIMITATIONS ON CERTAIN STAYS AND INJUNCTIONS.

Section 105 of title 11, United States Code, is amended by adding 
at the end the following:
``(e) Notwithstanding subsection (a) of this section, any provision 
of title 28, the Federal Rules of Bankruptcy Procedure, or any 
applicable nonbankruptcy law, the court may not issue any order, 
process, or judgment that has the purpose or effect of overriding or 
nullifying section 362(b)(27) of this title.''.

SEC. 4. AUTOMATIC STAY.

Section 362 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) by redesignating paragraphs (27), (28), and 
(29) as paragraphs (28), (29), and (30), respectively; 
and
(B) by inserting after paragraph (26) the 
following:
``(27) under subsection (a) of this section, of the 
commencement or continuation, including the issuance or 
employment of process, of a judicial, administrative, or other 
action or proceeding against an entity that is not a debtor in 
a case under this title, or any act to obtain or recover 
property of such entity, on account of or with respect to a 
protected claim against such entity, the debtor, or the estate 
(including a protected claim that is property of the debtor or 
the estate against such entity), if, during the 4-year period 
preceding the date of the filing of the petition, the debtor 
was the subject of, or was formed or organized in connection 
with, a divisional merger, spinoff, corporate restructuring, or 
other transaction changing the corporate structure of, and 
affecting the financial condition of, the debtor or an 
affiliate;''; and
(2) by adding at the end the following:
``(p) For the purposes of paragraph (27):
``(1) The term `protected claim' means--
``(A) a claim that--
``(i) is against a nondebtor entity or 
against property of a nondebtor entity that is 
alleged to be directly or indirectly liable for 
a claim described in subparagraph (B) against 
the debtor; and
``(ii) arises by reason of--
``(I) the nondebtor entity's 
ownership of a financial interest in 
the debtor, a past or present affiliate 
of the debtor, or a predecessor in 
interest of the debtor;
``(II) the nondebtor entity's 
involvement in the management of the 
debtor or a predecessor in interest of 
the debtor or the nondebtor entity's 
service as an officer, director, or 
employee of the debtor or a related 
party;
``(III) the nondebtor entity's 
provision of insurance to the debtor or 
a related party; or
``(IV) the nondebtor entity's 
involvement in a transaction changing 
the corporate structure, or in a loan 
or other financial transaction 
affecting the financial condition, of 
the debtor or a related party, 
including--
``(aa) involvement in 
providing financing (debt or 
equity) or advice to an entity 
involved in such a transaction; 
or
``(bb) acquiring or selling 
a financial interest in an 
entity as part of such a 
transaction; or
``(B) a claim--
``(i) against the debtor or a nondebtor 
entity or property of the debtor or a nondebtor 
entity;
``(ii) relating to injury, contamination, 
damage, or loss, including any claim for 
reimbursement, indemnity, contribution, or 
subrogation;
``(iii) affecting, directly or indirectly, 
not less than 100 individuals on or after the 
date of the filing of the petition;
``(iv) allegedly caused, directly or 
indirectly, by the presence of, or exposure to, 
a product, material, or substance designed, 
marketed, manufactured, sold, modified, 
extracted, serviced, or in any way used by the 
debtor or the nondebtor entity; and
``(v) arising, directly or indirectly, from 
acts or omissions, of the debtor, a predecessor 
in interest of the debtor, or a past or present 
affiliate of the debtor.
``(2) The term `related party' has the meaning given the 
term in section 524(g)(4)(A)(iii).''.

SEC. 5. TECHNICAL AMENDMENTS.

(a) Setoff.--Section 553 of title 11, United States Code, is 
amended--
(1) in subsection (a)--
(A) in paragraph (2)(B)(ii), by striking 
``362(b)(27)'' and inserting ``362(b)(28)''; and
(B) in paragraph (3)(C), ``362(b)(27)'' and 
inserting ``362(b)(28)''; and
(2) in subsection (b)(1), ``362(b)(27)'' and inserting 
``362(b)(28)''.
(b) Relief That May Be Granted Upon Filing Petition for 
Recognition.--Section 1519(f) of title 11, United States Code, is 
amended by striking ``(27)'' and inserting ``(28)''.
(c) Relief That May Be Granted Upon Recognition.--Section 1521(f) 
of title 11, United States Code, is amended by striking ``(27)'' and 
inserting ``(28)''.

SEC. 6. APPLICATION AND RULE OF CONSTRUCTION.

This Act and the amendments made by this Act shall--
(1) apply with respect to any case under title 11, United 
States Code, filed or pending on or after the date of enactment 
of this Act; and
(2) not be construed to affect the validity of any final 
judgment or order confirming a plan under chapter 11 of title 
11, United States Code, that was entered before the date of 
enactment of this Act.
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