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Chairman Nadler Statement for Subcommittee Hearing on "Oversight of the Bankruptcy Code, Part 1: Confronting Abuses of the Chapter 11 System"

Washington, D.C. - Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening statement, as prepared, during a Subcommittee on Antitrust, Commercial, and Administrative Law hearing on "Oversight of the Bankruptcy Code, Part 1: Confronting Abuses of the Chapter 11 System:"

"Today’s hearing is the first in a series of hearings examining potential reforms to ensure that commercial and consumer bankruptcy processes function effectively to support the economy, provide a meaningful option of last resort for individuals and businesses, and are not abused to deprive people of their rights or livelihoods. 

"In 2005, as the Ranking Member of this Subcommittee, I fought against the Bankruptcy Abuse Prevention and Consumer Protection Act—a disastrous amendment to the Bankruptcy Code that stacked the deck against everyday consumers in favor of creditors and giant companies.

"Many of the fundamental problems of our bankruptcy system stem from that law, which makes it more difficult for Americans who have fallen on hard times to escape crushing debt.

"With that in mind, it is essential that we examine a wide range of topics as part of this series.  This includes how student loans are treated in bankruptcy, the racial disparities that exist in the use of the consumer bankruptcy system, the rights of workers and retirees in bankruptcy, and the role of the U.S. Trustee Program.  These hearings will explore solutions to help people get a fresh start and a fair deal through the bankruptcy system. 

"Those principles are also at the heart of today’s hearing, which will examine corporate misuse of the bankruptcy system, especially a procedure by which wrongdoers can be immunized from liability—without agreement from the wronged party—in another entity’s bankruptcy proceeding.

"The bankruptcy system is supposed to work for everyone, but in many cases, it works only for the powerful.  And too often, it works best for big corporations and the very wealthy, who have not even filed for bankruptcy but who have figured out how to make the system work to their benefit.

"That is exactly what we are dealing with today: 'Bankruptcy grifters,' to borrow a term coined by Professor Lindsey Simon, that leech off another entity’s bankruptcy to hide their misdeeds, silence victims, and secure their ill-gotten payouts. 

"As Chairman Cicilline said, today’s hearing also builds off the important work of my good friend, Chairwoman Maloney. She has conducted a thorough, tireless investigation of the role of the Sackler family and Purdue Pharma in the opioid crisis. Under her leadership, the Committee on Oversight and Reform has shown the devastating impact that the corporate bankruptcy process can have on ordinary Americans. 

"In particular, she has helped shine a light on one of the most troubling aspects of the Purdue Pharma settlement—the use of a lifetime get-out-of-jail-free card known as a non-consensual non-debtor release.  Under this provision, the Sackler family, who have not had to file for bankruptcy, will escape liability entirely for their role in precipitating the opioid crisis, despite the objections of many of their victims.

"The families of the people who died from addiction and misuse of OxyContin should be able to hold accountable the people that flooded the country with a dangerous drug they knew would be abused. 

"That is why today I was proud to introduce, along with Senator Warren, Senator Durbin, Chair Maloney, and Chairman Cicilline, the 'Nondebtor Release Prohibition Act of 2021.'  Our bill will ban non-consensual non-debtor releases in most circumstances, impose strict safeguards for consensual non-debtor releases, and address the use of divisional mergers to shield a company’s assets from bankruptcy.

"I want to thank Senator Elizabeth Warren for our work together to develop this important legislation. She is a powerful advocate for ensuring that the bankruptcy system works for people instead of against them, and I am proud of our partnership on these crucial reforms to the bankruptcy code. 

"But most important of all, I want to thank the victims, survivors, affected families, and advocates who have come forward to say that the bankruptcy laws should not be allowed to force anyone—no matter who you are—into giving up their last chance at some semblance of justice against someone grifting off the bankruptcy process. 

"Victims of sexual assault should be able to hold their abusers, and the people and institutions that enabled those abusers, accountable.  No one should be coerced into giving up their right to a fair trial before a jury of their peers.  No one should be powerless to stop a corporate insider from looting the company they invested in. 

"And no one should be able to evade accountability by gaming the bankruptcy system.  Coerced non-debtor releases fall far outside of the limited jurisdiction of the bankruptcy courts and are inconsistent with  the Fifth Amendment’s right to due process of law. 

"Today’s hearing is an opportunity to conduct meaningful oversight over this concerning trend, and other abuses of the bankruptcy process, and to examine potential solutions to reverse them.

"I thank Chairman Cicilline again for holding this important hearing, I look forward to the testimony from our exceptional panel of witnesses, and I yield back the balance of my time."
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