Meaning of Texas two-step | Babel Free

Definitions

A two-step bankruptcy strategy under US bankruptcy law in which a solvent parent company spins-off liabilities into a new company, and then has that new company declare bankruptcy.

Examples

“This is called the “Texas two-step.” In its extreme form⟳ it sounds like⟳ very bad cheating: You can’t really put⟳ all the liabilities and none of the money in the box; that is just a way to defraud victims, and surely they’d find⟳ a way to do something about it. But a milder form⟳ of the Texas Two-Step is that you put⟳ the liabilities in the box, put⟳ the box in bankruptcy, but have⟳ the parent company guarantee⟳ its product liabilities.”

CEFR level