Bipartisan Bill Would Let Innocent Partners Discharge Fraud-Related Debt in Bankruptcy

Rep. Lou Correa (D-CA) and Rep. Laurel Lee (R-FL) have introduced the Bankruptcy Relief for Innocent Partners Act. The bill would amend the Bankruptcy Code so that only the person who committed fraud is barred from discharging the resulting debt, while an innocent partner would get the same fresh start as any other honest filer.

The sponsors point to Bartenwerfer v. Buckley, in which a couple ran a house-flipping business together and one partner committed fraud without the other’s knowledge. After the couple filed for bankruptcy, the Supreme Court ruled that current law did not allow the innocent partner to discharge the fraud-related debt.

The bill also aims to protect survivors of domestic and financial abuse from being forced to stay in a relationship for financial reasons. Correa’s office said half of domestic abuse survivors report experiencing coerced debt. The National Association of Consumer Bankruptcy Attorneys and the Center for Survivor Agency and Justice endorsed the bill. Erika Sussman of the Center said coerced debt damages credit and can block access to housing and employment.

Why it matters

The bill is a proposal and has not become law. If enacted, it would change how bankruptcy treats co-owners of property businesses, such as house flippers, when one partner is responsible for fraud.

Source: Rep. J. Luis Correa (D-CA), October 13, 2026. Read the original release