This bill would restrict bankruptcy courts from releasing non-debtor entities, such as company executives, shareholders, or parent companies, from legal liability as part of a bankruptcy reorganization plan without their explicit written consent. Currently, courts can approve such "nondebtor releases" that shield third parties from lawsuits by creditors, a practice that has become more common in large bankruptcy cases. The legislation would eliminate this authority except in narrow circumstances, such as when parties voluntarily agree in writing after receiving clear notice, or when courts handle specific legal proceedings. The bill also limits temporary court orders blocking lawsuits against non-debtors to 90 days in Chapter 11 bankruptcy cases and allows appeals courts to immediately lift such orders. Additionally, it would prevent courts from approving bankruptcy cases designed to isolate assets from liabilities through divisional mergers within the previous decade. The bill would take effect immediately upon enactment and apply to all pending and future bankruptcy cases.
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