Rep. Sykes Leads Bipartisan, Bicameral Effort to Rein In Corporate Bankruptcy Abuse

Rep. Sykes Leads Bipartisan, Bicameral Effort to Rein In Corporate Bankruptcy Abuse

WASHINGTON, D.C. - Today, U.S. Representative Emilia Sykes (OH-13) led a bipartisan, bicameral group including Rep. Lance Gooden (TX-05) and Senators Sheldon Whitehouse (D-RI) and Josh Hawley (R-MO) in reintroducing the Consumer Protection and Corporate Accountability in Bankruptcy Act to prevent corporations from using bankruptcy proceedings to limit accountability for legal claims.

The legislation targets corporate restructuring tactics that shift liabilities such as mass tort claims into bankruptcy while allowing offending companies to keep operating. Lawmakers say these practices can delay resolution for claimants and reduce confidence in the bankruptcy system.

The goal is to make sure bankruptcy is used for its intended purpose, helping financially distressed companies reorganize, not avoiding responsibility for harming the American people.

"For too long, greedy corporations have used shady bankruptcy tactics like the Texas Two-Step to avoid compensating innocent Americans they have hurt," said Rep. Sykes. "The Consumer Protection and Corporate Accountability in Bankruptcy Act will help prevent this bankruptcy abuse and finally hold corporations accountable for their actions. This legislation is an important step in cracking down on corporate greed and ensuring consumers in Ohio's 13th District and across the country get the justice they deserve."

"Corporate giants use bankruptcy tricks like the 'Texas Two-Step' to dodge accountability and leave victims empty-handed. This bill puts an end to this abuse and gives victims their day in court," said Rep. Gooden.

"Bankruptcy is supposed to grant an honest, distressed debtor a fresh start. Wealthy corporations should not be allowed to take advantage of bankruptcy to dodge accountability and mire the people they've hurt in endless delays. Our bipartisan bill would end the 'Texas Two-Step,' a slimy bankruptcy trick that has boomed in popularity over the past several years," said Sen. Whitehouse, who in 2022 chaired the first Senate hearing on the Texas Two-Step in his Judiciary Subcommittee on Federal Courts, Oversight, Agency Action, and Federal Rights.

The Consumer Protection and Corporate Accountability in Bankruptcy Act strengthens standards for good-faith bankruptcy filings and clarifies how affiliated companies are treated in cases involving mass tort and similar claims.

Consumer advocacy organizations including the American Association for Justice, the National Association of Consumer Bankruptcy Attorneys, and the National Association of Consumer Advocates support the legislation.

"Using a legal loophole known as the 'Texas Two-Step,' profitable corporations are filing sham bankruptcies to evade accountability to the Americans they've hurt," said American Association for Justice CEO Linda Lipsen. "These corporations should not be able to manipulate the legal system to dodge responsibility for hurting people. I thank Representatives Sykes and Gooden for continuing to champion efforts to rein in this abuse of power."

"NACBA is proud to support the Consumer Protection & Corporate Accountability in Bankruptcy Act," said Ike Shulman, Legislative Co-Chair of the National Association of Consumer Bankruptcy Attorneys (NACBA). "The bankruptcy system was designed to provide honest debtors with a fresh start, not to serve as a strategic shield for large corporations seeking to evade accountability. This legislation helps preserve the integrity of the bankruptcy process and reinforces the principle that it should not be manipulated to disadvantage injured consumers."

"Bankruptcy exists to serve entities that are genuinely unable to satisfy their debts," said Christine Hines, senior policy director at the National Association of Consumer Advocates. "This legislation would block corporate bad actors from using it as a shield to evade accountability to those they harm."

The legislation reflects growing bipartisan concern about the use of complex corporate structures in bankruptcy and their impact on injured parties seeking resolution.