I 
117TH CONGRESS 
1ST SESSION H. R. 4777 
To amend title 11, United States Code, to prohibit nonconsensual release 
of a nondebtor entity’s liability to an entity other than the debtor, 
and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 28, 2021 
Mr. NADLER (for himself, Mrs. CAROLYN B. MALONEY of New York, and Mr. 
CICILLINE) introduced the following bill; which was referred to the Com-
mittee on the Judiciary 
A BILL 
To amend title 11, United States Code, to prohibit non-
consensual release of a nondebtor entity’s liability to 
an entity other than the debtor, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Nondebtor Release 
Prohibition Act of 2021’’. 
SEC. 2. PROHIBITION OF NONDEBTOR RELEASES. 
(a) IN GENERAL.—Chapter 1 of title 11, United 
States Code, is amended by adding at the end the fol-
lowing: 
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‘‘§ 113. Prohibition of nondebtor releases 
‘‘(a) Except as provided in subsection (b) of this sec-
tion, subsection (a)(3), (g), (h), or (i) of section 524, sec-
tion 1201, and section 1301, the court may not— 
‘‘(1) with respect to the liability of an entity 
other than the debtor or the estate on, or the liabil-
ity of property of an entity other than the debtor or 
the estate for, a claim or cause of action of an entity 
other than the debtor or the estate— 
‘‘(A) approve any provision, in a plan of 
reorganization or otherwise, for the discharge, 
release, termination, or modification of such li-
ability; or 
‘‘(B) order the discharge, release, termi-
nation, or modification of such liability; or 
‘‘(2) with respect to a claim or cause of action 
of an entity other than the debtor or the estate 
against an entity other than the debtor or the estate, 
or against property of an entity other than the debt-
or or the estate, enjoin— 
‘‘(A) the commencement or continuation 
(including the issuance or employment of proc-
ess) of a judicial, administrative, or other action 
or proceeding to assert, assess, collect, recover, 
offset, recoup, or otherwise enforce such claim 
or cause of action; or 
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‘‘(B) any act to assert, assess, collect, re-
cover, offset, recoup, or otherwise enforce such 
claim or cause of action. 
‘‘(b) Nothing in subsection (a) of this section shall 
affect any power the court may have— 
‘‘(1) to authorize a sale, transfer, or other dis-
position of property free and clear of claims or inter-
ests; 
‘‘(2) to prevent an entity other than the debtor 
or the estate from exercising control over or other-
wise interfering with a right or interest (including a 
claim or cause of action) that is property of the es-
tate; 
‘‘(3) to bar a claim or cause of action for in-
demnity, reimbursement, contribution, or subroga-
tion against an entity that the estate has released 
from a claim or cause of action for which the holder 
of the barred claim or cause of action also is or may 
be liable or has or may have secured; 
‘‘(4) under applicable nonbankruptcy law, title 
28, or the Federal Rules of Bankruptcy Procedure, 
with respect to any claim or cause of action the 
court is hearing under section 157(a) or 1334(b) of 
title 28; 
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‘‘(5) to approve any disposition of a claim or 
cause of action of an entity other than the debtor or 
the estate to which such entity expressly consents in 
a signed writing provided that— 
‘‘(A) such consent is given only after clear 
and conspicuous notice to such entity of the 
proposed disposition in language appropriate 
for the typical holder of such claim or cause of 
action; 
‘‘(B) such consent cannot be given by— 
‘‘(i) accepting a proposed plan; or 
‘‘(ii) failing to accept or reject a pro-
posed plan, failing to object to a proposed 
plan, or any other silence or inaction; and 
‘‘(C) treatment of such entity, and any 
claims or interests of such entity, under a plan 
cannot be more or less favorable by reason of 
such entity’s consent or failure to consent; or 
‘‘(6) to enjoin the commencement or continu-
ation (including the issuance or employment of proc-
ess) of a judicial, administrative, or other action or 
proceeding against an entity appointed or employed 
(or whose appointment or employment was ap-
proved) by or under the auspices of the court, in an-
other court and without leave of the court, with re-
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spect to acts or omissions for which the entity was 
so appointed or employed. 
‘‘(c) In a case under chapter 11 of this title, no order 
or decree temporarily staying or enjoining, pursuant to 
this title, the commencement or continuation (including 
the issuance or employment of process) of a judicial, ad-
ministrative, or other action or proceeding to assert, as-
sess, collect, recover, offset, recoup, or otherwise enforce 
a claim or cause of action against an entity other than 
the debtor or the estate against an entity other than the 
debtor or the estate, or against property of an entity other 
than the debtor or the estate, shall extend (or be extended) 
beyond 90 days after the date of the order for relief with-
out the express consent of the entity whose claim or cause 
of action is stayed or enjoined. 
‘‘(d) Nothing in subsection (b) or (c) shall be con-
strued to authorize relief within the scope of subsection 
(b) or (c).’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 1 of title 11, United States Code, is amended 
by adding at the end the following: 
‘‘113. Prohibition of nondebtor releases.’’. 
SEC. 3. APPEAL OF NONDEBTOR STAYS. 
Section 158 of title 28, United States Code, is 
amended— 
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(1) in subsection (a), by striking ‘‘The’’ and in-
serting ‘‘Except as provided in subsection (d)(3), 
the’’; and 
(2) by inserting after subsection (d)(2) the fol-
lowing: 
‘‘(3)(A) The appropriate court of appeals shall 
have jurisdiction of appeals from all orders and de-
crees (whether interlocutory or final) temporarily 
staying or enjoining (or increasing the duration of 
any temporary stay or injunction of) the commence-
ment or continuation (including the issuance or em-
ployment of process) of a judicial, administrative, or 
other action or proceeding to assert, assess, collect, 
recover, offset, recoup, or otherwise enforce a claim 
or cause of action of an entity other than the debtor 
or the estate against an entity other than the debtor 
or the estate, or against property of an entity other 
than the debtor or the estate, entered in a case 
under chapter 11 of title 11 by— 
‘‘(i) a bankruptcy judge under section 157 
of this title; or 
‘‘(ii) a district court under section 1334 of 
this title. 
‘‘(B) If an appeal is taken under subparagraph 
(A), the stay order or decree shall immediately ter-
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minate and dissolve and be of no further force or ef-
fect 90 days after its issuance by the bankruptcy 
judge or district court, unless the appeal is dis-
missed or the court of appeals affirms the stay order 
or decree before that date.’’. 
SEC. 4. DIVISIONAL MERGERS. 
Section 1112 of title 11, United States Code, is 
amended— 
(1) by redesignating subsection (f) as sub-
section (g); and 
(2) by inserting after subsection (e) the fol-
lowing: 
‘‘(f) On a request of a party in interest, and after 
notice and a hearing, the court shall dismiss a case under 
this chapter if the debtor or a predecessor of the debtor 
was the subject of, or was formed or organized in connec-
tion with a divisional merger or equivalent transaction or 
restructuring that— 
‘‘(1) had the intent or foreseeable effect of— 
‘‘(A) separating material assets from mate-
rial liabilities of an entity eligible to be a debtor 
under this title; and 
‘‘(B) assigning or allocating all or a sub-
stantial portion of those liabilities to the debtor, 
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or the debtor assuming or retaining all or a 
substantial portion of those liabilities; and 
‘‘(2) occurred during the 10-year period pre-
ceding the date of the filing of the petition.’’. 
SEC. 5. RULE OF CONSTRUCTION. 
Nothing in this Act, or the amendments made by this 
Act, shall be construed to independently grant the court 
authority to issue nondebtor releases, injunctions, or stays 
in connection with an order for relief under chapter 11 
of title 11, United States Code, or in connection with an 
order confirming a plan of reorganization, nor shall any-
thing in this Act or such amendments be construed to 
imply that any other provision of title 11 of such Code 
or of nonbankruptcy law grants such authority. 
SEC. 6. EFFECTIVE DATE. 
(a) IN GENERAL.—Except as provided in subsection 
(b), this Act and the amendments made by this Act shall 
take effect on the date of the enactment of this Act and 
shall apply to any case under title 11, United States Code, 
that is— 
(1) pending in bankruptcy as of the date of the 
enactment of this Act; or 
(2) filed or reopened on or after the date of the 
enactment of this Act. 
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(b) VALIDITY OF FINAL ORDERS.—Nothing in this 
Act, or the amendments made by this Act, shall affect the 
validity of any final judgment, order, or decree as applied 
under section 158 of title 28, United States Code, entered 
before the date of the enactment of this Act. 
Æ 
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