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Senate lawmakers have introduced a bill that would force struggling companies to file for bankruptcy protection in a courtroom close to their headquarters, closing a controversial loophole that has enabled the country’s biggest restructurings to unfold in New York and Delaware.

On Monday, Sens. John Cornyn (R., Texas) and Elizabeth Warren (D., Mass.) said in a joint statement that the bill is meant to allow workers at bankrupt companies, small businesses, retirees and others to “participate in cases that will have tremendous impacts on their lives.”

The bill, if passed, would mark one of the biggest shifts in corporate bankruptcy history, sending cases to courts across the country. Cornyn said the measure “will strengthen the integrity of the bankruptcy system and build public confidence.”

Warren added that the bill would “prevent big companies from cherry-picking courts that they think will rule in their favor and to crack down on this corporate abuse of our nation’s bankruptcy laws.”

“Workers, creditors, and consumers lose when corporations manipulate the system to file for bankruptcy wherever they please,” she said in the statement.

An expanded version of this report appears at WSJ.com.

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