Bankruptcy Filings and New Trusts

When a company files for bankruptcy, lawsuits against it are usually paused by what is called an automatic stay. That can stop a claim in its tracks, even if it was close to settlement. The bankruptcy court then oversees how the company's asbestos liabilities will be handled, often over a long period that includes negotiations with representatives of current and future claimants. In many cases, the outcome is a new trust funded with the company's assets and insurance. Claimants often have to wait until the trust's procedures are approved and published before they can file for payment.

After a trust is established, it publishes its distribution procedures, claim forms and criteria. Only then can claims be submitted and reviewed. Some new trusts give specific treatment to claims that were already pending against the company before the bankruptcy filing. Others set particular windows or deadlines for filing. A new trust may also need time to build its staff and processing systems, so early claims can move more slowly than claims with long-established trusts. Staying informed about these developments matters, because the timing and requirements may differ from the trusts your family has already dealt with.

Claimants may be asked to take steps while a bankruptcy is underway, such as filing certain forms or voting on the proposed reorganization plan, depending on the case. Attorneys who handle asbestos claims usually track these cases closely and act for their clients when action is needed. If you have an existing claim against a company that files bankruptcy, keep your contact information current and follow your attorney's instructions about any notices you receive. Missing a required step in a bankruptcy case could affect how a claim is treated later, so do not ignore mail that mentions a bankruptcy court.

1. 1

   Forward any bankruptcy notice you receive to your attorney right away.

2. 2

   Keep your address and contact details current with your attorney and any trust.

3. 3

   Ask whether any defendant in your case is in bankruptcy and what that means for timing.

4. 4

   Follow instructions about ballots or claim forms connected to a bankruptcy case.