Article
Source: The Advocate
05.20.26
A team of Pillsbury lawyers recently co-wrote an article examining the common misconception that bankruptcy can serve as a shield against criminal investigations or regulatory enforcement actions. Although the Bankruptcy Code’s automatic stay may halt certain civil proceedings, the authors explain that criminal prosecutions, investigations and many regulatory actions are expressly permitted to continue notwithstanding a bankruptcy filing. As a result, bankruptcy generally does not prevent the government from pursuing enforcement actions related to alleged unlawful conduct.
The article, published in The Advocate, the quarterly journal of the Litigation Section of the State Bar of Texas, further discusses how bankruptcy may nonetheless influence the financial and procedural dimensions of a matter, including the treatment of claims, settlement dynamics and the distribution of assets. At the same time, the bankruptcy process can create additional exposure through mandatory disclosures, sworn testimony and heightened scrutiny of a debtor’s financial affairs. Ultimately, the authors conclude that while bankruptcy can alter the framework within which financial liabilities are resolved, it does not eliminate criminal accountability or insulate parties from government enforcement efforts.
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