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