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.
About This Bill
Committee
Latest Action · July 23, 2024
Read twice and referred to the Committee on the Judiciary.
The Ending Corporate Bankruptcy Abuse Act of 2024 targets what supporters view as manipulative corporate bankruptcy filings by giving courts new grounds to dismiss Chapter 11 cases. The bill allows judges to dismiss bankruptcy petitions that are either objectively futile or filed in bad faith, and it creates several presumptions that filings are in bad faith, such as when a company recently underwent a divisive merger, transferred substantial assets to insiders, or lacks a legitimate reorganization purpose. The legislation also limits the automatic stay in bankruptcy—a provision that normally halts creditor actions—by carving out protection for nondebtor entities (like parent companies or private equity owners) when suing over certain "protected claims" related to injuries, environmental damage, or product liability affecting at least 100 people, if the company underwent a corporate restructuring in the prior four years. The bill applies to bankruptcy cases filed on or after its enactment and places the burden of proof on the debtor to rebut presumptions of bad faith, while shifting decision-making timelines from a "reasonable period" to a hard deadline of 24 months for converting or dismissing Chapter 11 cases.
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