Congress moves to close the corporate bankruptcy escape hatch used against victims
H.R. 8393 — Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 · Filed by Emilia Sykes (D-OH) · 3 cosponsors · Introduced Apr 20, 2026 · Referred to committee
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What it does
This bill reforms Chapter 11 bankruptcy law to prevent corporations from using divisional mergers or other restructuring maneuvers to escape mass tort liability — a tactic sometimes called the 'Texas Two-Step.' It creates strong legal presumptions that such filings are made in bad faith, and it prevents bankruptcy courts from shielding non-debtor parent companies or affiliates from lawsuits brought by large groups of injured claimants. Plaintiffs in mass tort cases (e.g., asbestos, opioid, or product liability victims) and their creditors are the primary beneficiaries.
Why we flagged it
The bill targets specific corporate bankruptcy tactics — particularly divisional mergers and bad-faith filings — that have been used to shield parent companies from mass tort liability, making it primarily a consumer and creditor protection measure with significant implications for corporate restructuring strategy.
What the text implies
- Retroactive application to all pending cases—even those with years of ongoing restructuring—may destabilize Chapter 11 proceedings already in progress and force courts to revisit confirmed plans and existing creditor agreements.
- The 4-year lookback period on divisional mergers creates a broad net that could invalidate or complicate legitimate pre-bankruptcy corporate restructurings undertaken for reasons entirely unrelated to mass tort avoidance.
The full analysis lists 5 implications of this text.
Who stands to gain
mass tort plaintiffs and their attorneys; unsecured creditors in Chapter 11 cases; creditors' committees