Civil Court Bankruptcy Protection
The United States Bankruptcy Code (USBC) is a long and complicated piece of legislation. It’s an area where attorneys study for years and specialize in. The American asbestos disaster saw many companies use the USBC to protect their long-term financial interests. The USBC also helped reduce their legal liability for causing so many people to become ill or die after being exposed to their asbestos-made products.
Most settlements for mesothelioma patients come from bankruptcy trust funds, rather than from awards decided by court verdicts.
There are two main mechanisms in the USBC that victims of mesothelioma and other asbestos-caused diseases need to know.
Asbestos companies had two USBC options when facing lawsuits:
- Chapter 7 Liquidation: Insolvent companies were forced into bankruptcy liquidation when they couldn’t pay all the lawsuit awards. Chapter 7 of the USBC forces a company to have a trustee sell all their assets. These funds are then distributed to those who are owed money. Asbestos companies dissolving under Chapter 7 liquidation disappear and have no more value.
- Chapter 11 Protection: Solvent companies used the USBC Chapter 11 provisions to stop ongoing lawsuits and take time to restructure the company. This allowed bigger asbestos companies to negotiate settlements while they carried on business. Some companies merged, renamed or deregistered. However, big and wealthy corporations petitioned the courts for legal protection. These companies were able to fund specialized trust accounts for present and future settlements. These settlement trust funds were administered by third-party trustees. The asbestos-supplying companies were no longer liable for damages, nor open to future lawsuits.
Administering Asbestos Bankruptcy Trust Funds
Over 100 asbestos bankruptcy trust funds have been established in the United States since the mid-1980s. Find out if you qualify.
At least a dozen trust funds are worth over $1 billion. In total, bankruptcy trust funds have approximately 30 billion dollars currently available for distribution. Each trust has different qualifications and rules for how it administers funds and who can access them.
Asbestos bankruptcy trust funds are moving targets. Once an asbestos company funded the trust, they’re completely absolved of future responsibility. They cannot be sued. The trustee normally consists of a board of governors who invest the main funds in order to keep it solvent. The fund balance goes up and down depending on the investment returns and what claims are paid in a particular period.
Most asbestos bankruptcy trust funds have a schedule of values they pay to qualified claimants. Those who are seriously ill will typically receive higher settlements than those with milder diseases. However, claimants are rarely paid the total value of what the schedule dictates. Many only receive dimes on the dollar according to what funds the trust retains and how they project future claims will be administered.