Whitehouse, Hawley, Durbin, Sykes, Gooden Reintroduce Bipartisan Legislation to End ‘Texas Two-Step’

The Consumer Protection and Corporate Accountability in Bankruptcy Act would prevent an abusive bankruptcy trick used by big corporations to avoid compensating Americans they have hurt

Washington, DC - U.S. Senators Sheldon Whitehouse (D-RI), Josh Hawley (R-MO), and Dick Durbin (D-IL), the Senate Democratic Whip, and Representatives Emilia Sykes (D-OH) and Lance Gooden (R-TX) reintroduced the Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026. This bipartisan legislation would deter the growing trend of corporations using a bankruptcy maneuver known as the "Texas Two-Step" to evade responsibility for injuries they caused, bog down victims in bankruptcy proceedings, and delay justice for Americans.

"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.

"It is long past time for Congress to hold predatory corporations accountable for their backroom bankruptcy maneuvers that harm countless Americans. This bipartisan legislation ends the corporate schemes and puts power back into the hands of the people," said Sen. Hawley.

"Corporations have side stepped accountability through deceitful bankruptcy tactics for far too long. Maneuvers like the Texas Two-Step allow big corporations to avoid responsibility for the harms their products inflict on Americans, which we've seen with asbestos in Georgia-Pacific drywall, cancer-causing Johnson & Johnson baby powder, and more. It's time for our bipartisan bill to ban this bankruptcy loophole and give victims their day in court," said Sen. Durbin, Ranking Member of the Senate Judiciary Committee.

"For too long, greedy corporations have used shady bankruptcy tactics like the Texas Two-Step to avoid compensating innocent Americans they have hurt. 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," said Rep. Sykes.

"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.

The Texas Two-Step is an abusive bankruptcy maneuver used by corporations to avoid paying out massive injury claims. The maneuver allows corporations to put their assets out of reach while miring injury victims in bankruptcy proceedings that drag out for years. In recent years, companies like Georgia-Pacific and Johnson & Johnson have repeatedly tried to use this maneuver to bypass mass injury lawsuits, freezing in place hundreds of thousands of legal claims while continuing business as usual.

Last month, Senators Durbin, Whitehouse, and Hawley submitted an amicus brief to the Supreme Court in Official Committee of Asbestos Claimants of Bestwall LLC v. Bestwall LLC, supporting the hundreds of thousands of victims of exposure to Georgia-Pacific's asbestos-linked products. To avoid facing the legal claims of victims in court, Georgia-Pacific "moved" to Texas for less than five hours, offloaded its asbestos-related liabilities onto a shell company called Bestwall, put Bestwall into bankruptcy, and then claimed that Bestwall's bankruptcy protected the entire Georgia-Pacific enterprise from accountability. Other Texas Two-Step bankruptcies have followed this model.

The Consumer Protection and Corporate Accountability in Bankruptcy Act would deter the Texas Two-Step and ensure injury victims have a chance to be heard in court. The legislation would instruct courts to presume a bankruptcy has been filed in bad faith if it appears to be a Texas Two-Step bankruptcy. This would standardize a rule for dismissing a bankruptcy across federal circuit courts. The legislation would also prohibit stays of litigation against a debtor's non-bankrupt affiliates when the debtor engaged in a Texas Two-Step maneuver within the previous four years. By carving out an exception to the statutory stay and prohibiting injunctions in Texas Two-Step cases, the legislation deters corporations from abusing bankruptcy protections and ensures that injury victims can get their day in court.

The Consumer Protection and Corporate Accountability in Bankruptcy Act of 2026 is endorsed by the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.

The text of the bill can be found here.

###