[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4746 Introduced in Senate (IS)]

<DOC>






118th CONGRESS
  2d Session
                                S. 4746

To amend title 11, United States Code, to make the filing of a petition 
for relief under chapter 11 that is objectively futile or in subjective 
  bad faith a cause for dismissal of the case, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 23, 2024

Mr. Whitehouse (for himself, Mr. Hawley, and Mr. Durbin) introduced the 
 following bill; which was read twice and referred to the Committee on 
                             the Judiciary

_______________________________________________________________________

                                 A BILL


 
To amend title 11, United States Code, to make the filing of a petition 
for relief under chapter 11 that is objectively futile or in subjective 
  bad faith a cause for dismissal of the case, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ending Corporate Bankruptcy Abuse 
Act of 2024''.

SEC. 2. CONVERSION OR DISMISSAL UNDER CHAPTER 11.

    Section 1112(b) of title 11, United States Code, is amended--
            (1) in paragraph (2)(A), by striking ``within a reasonable 
        period of time'' and inserting ``not later than 24 months after 
        the date of the filing of the petition'';
            (2) in paragraph (4)--
                    (A) subparagraph (O), by striking ``and'' at the 
                end;
                    (B) in subparagraph (P), by striking the period at 
                the end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(Q) with respect to the dismissal of a case under this 
        chapter, the filing of a petition for relief or the 
        continuation of a case under this title that is--
                    ``(i) objectively futile; or
                    ``(ii) in subjective bad faith.''; and
            (3) by adding at the end the following:
    ``(g)(1) For the purpose of subsection (b)(4)(Q), the court shall 
presume that a petition has been filed or that a case is continuing 
under this title in subjective bad faith if the court determines that 
the debtor manufactured the venue for the case.
    ``(2) The presumption under paragraph (1) may be rebutted only 
based on clear and convincing evidence.
    ``(h)(1) For the purpose of subsection (b)(4)(Q), the court shall 
conclusively presume that a petition has been filed or that a case 
under this title that is continuing in subjective bad faith if the 
court determines that--
            ``(A) a purpose or effect of the filing or continuation is 
        to--
                    ``(i) gain a tactical litigation advantage;
                    ``(ii) impose undue delay upon creditors; or
                    ``(iii) cap the total amount of the liability of 
                the debtor to 2 or more creditors holding protected 
                claims (as defined in section 362(p)(1)) that the 
                debtor or any affiliate has property of value 
                sufficient to pay in full as those claims would come 
                due;
            ``(B) during the 4-year period preceding the date of the 
        filing of the petition, the debtor was the subject of, or was 
        formed or organized in connection with, a divisional merger or 
        similar transaction changing the corporate structure of and 
        affecting the financial condition of the debtor or an 
        affiliate;
            ``(C) during the 4-year period preceding the date of the 
        filing of the petition, the debtor engaged in a transfer of 
        substantial assets to or for benefit of or incurred substantial 
        obligations from or for the benefit of any insider or affiliate 
        that, notwithstanding subsections (e) through (g) and (j) of 
        section 546, is avoidable under section 544(b) or subsection 
        (a)(1) or (e) of section 548; or
            ``(D) the debtor does not have a valid reorganizational 
        purpose.
    ``(2) In making a determination under paragraph (1)(D), the court 
shall consider and give weight to whether any appointed creditors' 
committee supports the dismissal of the case.
    ``(i) In a determination under subsection (g) or (h), the debtor 
shall have the burden of proof.''.

SEC. 3. LIMITATIONS ON CERTAIN STAYS AND INJUNCTIONS.

    Section 105 of title 11, United States Code, is amended by adding 
at the end the following:
    ``(e) Notwithstanding subsection (a) of this section, any provision 
of title 28, the Federal Rules of Bankruptcy Procedure, or any 
applicable nonbankruptcy law, the court may not issue any order, 
process, or judgment that has the purpose or effect of overriding or 
nullifying section 362(b)(27) of this title.''.

SEC. 4. AUTOMATIC STAY.

    Section 362 of title 11, United States Code, is amended--
            (1) in subsection (b)--
                    (A) by redesignating paragraphs (27), (28), and 
                (29) as paragraphs (28), (29), and (30), respectively; 
                and
                    (B) by inserting after paragraph (26) the 
                following:
            ``(27) under subsection (a) of this section, of the 
        commencement or continuation, including the issuance or 
        employment of process, of a judicial, administrative, or other 
        action or proceeding against an entity that is not a debtor in 
        a case under this title, or any act to obtain or recover 
        property of such entity, on account of or with respect to a 
        protected claim against such entity, the debtor, or the estate 
        (including a protected claim that is property of the debtor or 
        the estate against such entity), if, during the 4-year period 
        preceding the date of the filing of the petition, the debtor 
        was the subject of, or was formed or organized in connection 
        with, a divisional merger, spinoff, corporate restructuring, or 
        other transaction changing the corporate structure of, and 
        affecting the financial condition of, the debtor or an 
        affiliate;''; and
            (2) by adding at the end the following:
    ``(p) For the purposes of paragraph (27):
            ``(1) The term `protected claim' means--
                    ``(A) a claim that--
                            ``(i) is against a nondebtor entity or 
                        against property of a nondebtor entity that is 
                        alleged to be directly or indirectly liable for 
                        a claim described in subparagraph (B) against 
                        the debtor; and
                            ``(ii) arises by reason of--
                                    ``(I) the nondebtor entity's 
                                ownership of a financial interest in 
                                the debtor, a past or present affiliate 
                                of the debtor, or a predecessor in 
                                interest of the debtor;
                                    ``(II) the nondebtor entity's 
                                involvement in the management of the 
                                debtor or a predecessor in interest of 
                                the debtor or the nondebtor entity's 
                                service as an officer, director, or 
                                employee of the debtor or a related 
                                party;
                                    ``(III) the nondebtor entity's 
                                provision of insurance to the debtor or 
                                a related party; or
                                    ``(IV) the nondebtor entity's 
                                involvement in a transaction changing 
                                the corporate structure, or in a loan 
                                or other financial transaction 
                                affecting the financial condition, of 
                                the debtor or a related party, 
                                including--
                                            ``(aa) involvement in 
                                        providing financing (debt or 
                                        equity) or advice to an entity 
                                        involved in such a transaction; 
                                        or
                                            ``(bb) acquiring or selling 
                                        a financial interest in an 
                                        entity as part of such a 
                                        transaction; or
                    ``(B) a claim--
                            ``(i) against the debtor or a nondebtor 
                        entity or property of the debtor or a nondebtor 
                        entity;
                            ``(ii) relating to injury, contamination, 
                        damage, or loss, including any claim for 
                        reimbursement, indemnity, contribution, or 
                        subrogation;
                            ``(iii) affecting, directly or indirectly, 
                        not less than 100 individuals on or after the 
                        date of the filing of the petition;
                            ``(iv) allegedly caused, directly or 
                        indirectly, by the presence of, or exposure to, 
                        a product, material, or substance designed, 
                        marketed, manufactured, sold, modified, 
                        extracted, serviced, or in any way used by the 
                        debtor or the nondebtor entity; and
                            ``(v) arising, directly or indirectly, from 
                        acts or omissions, of the debtor, a predecessor 
                        in interest of the debtor, or a past or present 
                        affiliate of the debtor.
            ``(2) The term `related party' has the meaning given the 
        term in section 524(g)(4)(A)(iii).''.

SEC. 5. TECHNICAL AMENDMENTS.

    (a) Setoff.--Section 553 of title 11, United States Code, is 
amended--
            (1) in subsection (a)--
                    (A) in paragraph (2)(B)(ii), by striking 
                ``362(b)(27)'' and inserting ``362(b)(28)''; and
                    (B) in paragraph (3)(C), ``362(b)(27)'' and 
                inserting ``362(b)(28)''; and
            (2) in subsection (b)(1), ``362(b)(27)'' and inserting 
        ``362(b)(28)''.
    (b) Relief That May Be Granted Upon Filing Petition for 
Recognition.--Section 1519(f) of title 11, United States Code, is 
amended by striking ``(27)'' and inserting ``(28)''.
    (c) Relief That May Be Granted Upon Recognition.--Section 1521(f) 
of title 11, United States Code, is amended by striking ``(27)'' and 
inserting ``(28)''.

SEC. 6. APPLICATION AND RULE OF CONSTRUCTION.

    This Act and the amendments made by this Act shall--
            (1) apply with respect to any case under title 11, United 
        States Code, filed or pending on or after the date of enactment 
        of this Act; and
            (2) not be construed to affect the validity of any final 
        judgment or order confirming a plan under chapter 11 of title 
        11, United States Code, that was entered before the date of 
        enactment of this Act.
                                 <all>