The Texas Two-Step is a fairly simple dance, but in the world of corporate bankruptcy, it’s the name of a sophisticated maneuver that some profitable companies employ to stop mass tort liabilities and limit the settlements due to victims. It’s a legal loophole involving a company split and a strategic division of assets and liabilities. In this manner, the companies win and the tort victims, by comparison, lose. But there may be reason for cautious optimism. Proof Over Precedent interviews bankruptcy scholar and law professor Melissa Jacoby about the Texas two-step bankruptcy practice, the reasons courts allow it, and the avenues under consideration for making bankruptcy a more just and exceptional option for corporations.
Read the corresponding blog post.
Speakers:
- Jacquelynn Lin, J.D. candidate, Harvard Law School
- Melissa Jacoby, Graham Kenan Distinguished Professor of Law, University of North Carolina at Chapel Hill (emerita since July 2025)
Resources mentioned:
- Jacoby, Melissa, Unjust Debts: How Our Bankruptcy System Makes America More Unequal
- Texas two-step bankruptcy
- “The Moral Limits of Bankruptcy Law”, Opinion, New York Times
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Proof Over Precedent cover art by Courtney Chrystal