HR 10942: No Bonuses in Bankruptcy Act of 2026

HR 10942 in plain English: This bill would prohibit companies that have filed for bankruptcy from paying bonuses to employees who earn more than $250,000 per year or who qualify as insiders of the debtor.

Stated purpose

The bill aims to prohibit companies going through bankruptcy from paying bonuses to highly compensated employees (those earning over $250,000 per year) and to company insiders during the bankruptcy case. It also allows bankruptcy trustees to recover such bonuses if they were paid within 180 days before a bankruptcy filing.

Key points

• Bans bankruptcy debtors from paying bonuses to employees earning over $250,000 annually
• Also bars bonuses to company insiders during bankruptcy proceedings
• Prohibits payments that would push an employee's annual compensation above $250,000

Arguments supporters make

• When a company is bankrupt and unable to fully pay its debts, rewarding top earners with bonuses is unfair to creditors and lower-paid workers who bear the losses.
• Executives and highly paid insiders already earn far above average salaries, so extra bonuses during bankruptcy are unnecessary to retain talent and represent poor use of limited assets.
• The clawback provision prevents companies from rushing to pay out bonuses right before filing for bankruptcy to shield money from creditors.

Arguments opponents make

• Retaining experienced leadership is critical to successfully restructuring a bankrupt company, and removing all incentive pay may cause key managers to leave, ultimately harming creditors and employees more.
• A blanket ban with a fixed $250,000 threshold does not account for industry differences or the complexity of restructurings where performance bonuses may be essential to saving the business.
• Allowing trustees to claw back bonuses paid up to 180 days before a bankruptcy filing creates significant legal uncertainty for employees who had no way of knowing their employer would eventually go bankrupt.

Tradeoffs

Protecting creditors and lower-paid workers from seeing assets spent on executive bonuses must be weighed against the risk that removing all bonus pay makes it harder to keep the skilled leadership that a struggling company may need to recover and repay its debts.

Current status in Congress: In committee.

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