This bill would significantly restrict how companies can use Chapter 11 bankruptcy protection, particularly in cases involving mass harm to consumers. It amends federal bankruptcy law to allow courts to dismiss Chapter 11 cases if the filing is objectively futile or filed in bad faith, with specific presumptions that cases are filed in bad faith when companies engage in corporate restructuring to avoid liability, transfer assets to insiders, or lack a genuine reorganization plan. The bill creates a new "protected claim" category that prevents bankruptcy courts from automatically staying lawsuits against non-bankrupt parent companies and affiliates when the bankrupt company underwent recent corporate restructuring affecting 100 or more people injured by product exposure or contamination. The changes establish a 24-month timeline for companies to demonstrate a viable reorganization plan, and place the burden on the debtor to prove their case is not filed in bad faith. The legislation applies to all bankruptcy cases filed on or after its enactment date, though it does not affect bankruptcy plans already confirmed before the law takes effect.
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