| Bankruptcy in the United States |
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| Bankruptcy in the United States |
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| Aspects of bankruptcy law |
A Texas two-step bankruptcy is a two-step bankruptcy strategy under US bankruptcy law in which a solvent parent company spins off liabilities into a new company, and then has that new company declare bankruptcy.[1] In the first step, the parent company undergoes a Texas divisive merger, which allows companies to split off their liabilities from their assets. In the second step, the newly created spin-off declares a chapter 11 bankruptcy, usually in North Carolina, where bankruptcy courts are perceived to be more open to this scheme. The Texas two-step allows solvent companies to shield their assets from litigants using protections that are normally reserved for bankrupt companies.[1] The goal of a Texas two-step is for the parent company to gain a third-party release of all liabilities it assigned to its spinoff, thus preventing litigants from pursuing those claims against the parent.[1][2][3]
- ^ a b c Francus, Michael (June 11, 2022). "Texas Two-Stepping Out of Bankruptcy". Michigan Law Review Online. 120: 28–50. Archived from the original on September 4, 2022. Retrieved September 4, 2022.
- ^ Kinel, Norman (February 22, 2022). "The "Texas Two-Step" Firestorm: This Is No Dance!". The National Law Review. Archived from the original on September 4, 2022. Retrieved September 4, 2022.
- ^ Goldstein, Samantha (May 3, 2022). "The Texas Two-Step: A Controversial Bankruptcy Dance". University of Miami Law Review. Archived from the original on September 4, 2022. Retrieved September 4, 2022.