Bloomberg Law: Elizabeth Warren Seeks Crackdown on 'Two-Step' Bankruptcy Move

Sen. Elizabeth Warren (D-Mass.) will reintroduce legislation to rein in a controversial bankruptcy maneuver and prevent nonbankrupt entities from using Chapter 11 to skirt liability.

Warren plans to introduce on Wednesday the Nondebtor Release Prohibition Act of 2024.

The bill would prohibit nonconsensual litigation shields in bankruptcy plans for people and entities that aren't bankrupt, codifying what the high court banned in its 5-4 decision in Harrington v. Purdue Pharma. The justices rejected Purdue's $6 billion bankruptcy settlement, ruling against liability releases for members of the billionaire Sackler family who own the pharmaceutical giant, who hadn’t filed for bankruptcy themselves.

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