Us Congress Senate Bill SB4746

Us Congress 2023-2024 Regular Session

• Introduced: 7/23/24
• Refer: 7/23/24

Caption

Ending Corporate Bankruptcy Abuse Act of 2024

Impact

If enacted, this bill would create clear guidelines for when a bankruptcy case could be dismissed, particularly emphasizing the necessity of establishing a valid reorganization plan for the filing to proceed. Under the proposed changes, courts would have new presumption standards that favor dismissal if certain conditions, such as a tactical litigation advantage or undue delay, are evident. In doing so, the legislation seeks to enhance the integrity of the bankruptcy system, potentially impacting entities' decisions to initiate bankruptcy proceedings in the first place.

Summary

SB4746, also known as the Ending Corporate Bankruptcy Abuse Act of 2024, seeks to amend Title 11 of the United States Code by introducing provisions that allow courts to dismiss bankruptcy petitions deemed objectively futile or filed in subjective bad faith. This change aims to curb potential abuses of the bankruptcy process, where companies may exploit the legal framework for tactics that do not serve the interests of creditors. The bill's intent is to ensure that filing for Chapter 11 bankruptcy serves legitimate purposes and is not used for gain at the expense of creditors.

Contention

Notable points of contention surround the definition of 'subjective bad faith' and the implications of imposing stricter standards on companies filing for bankruptcy. Critics argue that these provisions could inadvertently restrict access to crucial legal remedies for legitimate businesses while simultaneously allowing courts broad discretion in determining good faith, potentially leading to inconsistent outcomes. Proponents assert that tightening the regulations is necessary to discourage misuse of bankruptcy laws and to protect the interests of creditors, reinforcing the responsibility of debtors to act honestly and transparently in financial distress situations.