Bankruptcy law blocks executive bonuses, protects creditors during insolvency
H.R. 10942 — No Bonuses in Bankruptcy Act of 2026 · Filed by Mary Scanlon (D-PA) · Introduced Oct 29, 2026 · Referred to committee
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What it does
This bill amends bankruptcy law to prohibit bankruptcy courts from approving bonus payments to highly paid employees (earning over $250,000 annually) and company insiders during bankruptcy proceedings. It also allows bankruptcy trustees to recover bonus payments made in the 180 days before bankruptcy filing if those bonuses would have been disallowed. The bill exempts sales commissions and union-negotiated compensation.
Why we flagged it
The bill's operative mechanism restricts executive compensation during insolvency to preserve estate assets for creditors and lower-paid employees. It is a debtor-estate protection measure, not a deregulation or subsidy.
What the text implies
- May incentivize executives to resign or seek employment elsewhere before bankruptcy filing, potentially destabilizing distressed companies during critical restructuring periods.
- The 180-day lookback for preference avoidance may create litigation over timing of bonus payments and intent, increasing administrative costs.
- Exemption for sales commissions and union contracts may create pressure to reclassify bonuses as commissions or to accelerate union negotiations before insolvency.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
Ordinary creditors and employees owed wages benefit from preservation of bankruptcy estate assets; the bill prevents insiders and highly compensated executives from extracting value during insolvency. Employees at lower pay levels and unsecured creditors stand to recover more from the estate.
Who stands to gain
- unsecured creditors
- wage-earning employees
- bankruptcy estates
Named in the bill
bankruptcy courts, bankruptcy trustees, debtors, insiders, employees, creditors, title 11 United States Code, Section 503, Section 547
Where it stands
- Oct 29, 2026 — Introduced · Congress.gov: “Introduced in House”
- Oct 29, 2026 — Referred to House Committee on the Judiciary · Congress.gov: “Referred to the House Committee on the Judiciary”
Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (2,214 characters) on Nov 4, 2026. Section numbers in the findings refer to that text, linked below; transparency and hidden-provision scores are compared against the median of 16,938 analysed bills.
Status and sponsors — Congress.gov's bill record — actions, committee referrals and cosponsors — loaded nightly. The timeline shows status changes, not every procedural action.
As of — page rendered 2026-11-04.
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