H.R. 8393 — Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026

This section revises standards for converting a chapter 11 bankruptcy case to chapter 7 or dismissing it under 11 U.S.C. §1112(b) as follows: (1) in the exception to mandatory conversion or dismissal, limits the required reasonable likelihood of plan confirmation to not later than 24 months after the petition filing date (from within a reasonable period of time); (2) adds to the list of factors weighing against dismissal or conversion a new exception for cases that are objectively futile or continued in subjective bad faith; and (3) adds new subsections (g) through (i) establishing (a) a rebuttable presumption (by clear and convincing evidence) of subjective bad faith if the debtor manufactured the venue, (b) conclusive presumptions of subjective bad faith if the filing or continuation seeks a tactical litigation advantage, delays creditors, caps liability on protected claims (as defined in 11 U.S.C. §362(p)(1)) despite sufficient assets to pay them in full, involves a divisional merger or similar transaction in the prior four years, includes avoidable transfers to insiders or affiliates in the prior four years, or lacks a valid reorganizational purpose (considering any creditors' committee position), and (c) a burden of proof on the debtor for these determinations. (Thus, these changes facilitate earlier dismissal of potentially abusive chapter 11 cases, including those involving venue shopping or debtor misconduct.)

This section limits the equitable powers of bankruptcy courts under §105(a) by prohibiting any order, process, or judgment—regardless of authority from §105(a), title 28, the Federal Rules of Bankruptcy Procedure, or nonbankruptcy law—that overrides or nullifies the automatic stay exception in §362(b)(27). (Section 362(b)(27) excepts from the automatic stay a financial participant's right to terminate, liquidate, net, or set off obligations under swap agreements, securities contracts, repurchase agreements, and similar financial instruments.)

This section adds a new exception to the automatic stay in Bankruptcy Code Section 362(b)(27) for judicial, administrative, or other actions against a non-debtor entity to obtain or recover property on account of a "protected claim" against that entity, the debtor, or the estate if, during the 4-year period preceding the bankruptcy petition, the debtor was the subject of or formed via a divisional merger, spinoff, corporate restructuring, or similar transaction affecting its or an affiliate's financial condition. (As background, the automatic stay under Section 362(a) generally halts creditor actions against a debtor and its property upon bankruptcy filing; this exception permits creditors to pursue specified non-debtors notwithstanding the stay.) It further defines "protected claim" in new subsection (p) to include (1) claims against a non-debtor based on its financial interest in, management of, insurance for, or involvement in corporate/financial transactions with the debtor or related party; or (2) claims against the debtor or non-debtor relating to injury, contamination, or loss from a product, material, or substance affecting at least 100 individuals on or after the petition date, allegedly caused by acts or omissions of the debtor, predecessor, or affiliate. (Thus, the exception targets liability avoidance via recent corporate restructurings, including for mass tort claims; "related party" cross-references the Bankruptcy Code's asbestos provision at Section 524(g)(4)(A)(iii).)

This section makes technical amendments to the Bankruptcy Code to update cross-references from "362(b)(27)" to "362(b)(28)" in (1) the setoff provision (§553(a)(2)(B)(ii), (a)(3)(C), and (b)(1)); (2) the provision authorizing relief upon filing a petition for recognition of a foreign proceeding (§1519(f)); and (3) the provision authorizing relief upon such recognition (§1521(f)).

This section applies the Act and its amendments to any case under title 11, United States Code (Bankruptcy Code), that is filed or pending on or after the date of enactment. The section further specifies that the Act shall not be construed to affect the validity of any final judgment or order confirming a chapter 11 plan entered before the date of enactment.