Protecting Creditor Rights: Banning Nonconsensual Third-Party Releases in Bankruptcy.
This law protects citizens and small businesses who have claims against large corporations undergoing bankruptcy reorganization. It prohibits courts from automatically releasing related parties (like executives or parent companies) from liability, ensuring victims can still pursue compensation from these non-bankrupt entities unless they explicitly agree to drop their claims. It also targets corporate maneuvers designed to shield assets by splitting liabilities into a bankrupt entity.
Key points
Individuals retain the right to sue third parties related to a bankrupt corporation, even after a reorganization plan is approved.
Courts cannot grant liability releases to non-debtors without the explicit, written consent of the affected creditor or victim (silence is not consent).
Makes it harder for companies to use corporate restructuring (like divisional mergers) shortly before bankruptcy to hide assets and dump liabilities.
Expired
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