Mesothelioma Bankruptcy

With the sharp increase in the number of asbestos claims filed, the number of defendants named and the rising cost of litigation for these companies, a growing number of defendants are filing for bankruptcy. Bankruptcy allows these companies to restructure or reorganize finances in the attempt to rebound from their financial difficulties. These companies typically file for Chapter 11 bankruptcy, which addresses the company’s debt. For companies to file for Chapter 11 bankruptcy, they must submit a repayment outline to both their creditors and the court, which must be approved by the court before becoming official. Sometimes companies will negotiate a bankruptcy reorganization plan before actually filing for bankruptcy protection, which is known as prepackaged bankruptcy.

While a company is in its bankruptcy proceedings, all legal action against them is stopped. Once a company has filed for bankruptcy, they create a trust which, once formed, becomes the only source of compensation for asbestos victims from the defendant. Creating a personal-injury trust bars individuals claiming asbestos injury from suing the bankrupt companies in the tort system. Since 1982, when the Johns-Manville Corporation became one of the first to file for an asbestos-related bankruptcy petition, nearly all major manufacturers involved in such litigation have done so as well. These major asbestos defendants often faced enormous liabilities for the harm asbestos caused.

When these major companies are protected from lawsuits by filing for bankruptcy protection, plaintiffs are left to seek compensation from companies that played a less notable role in the use and production of asbestos. Often these companies had asbestos materials encapsulated in their products or housed the material somewhere on their grounds.

For individuals seeking compensation from a company that has filed for bankruptcy, they must contact those handling the settlement trust. Oftentimes, the experience of an attorney familiar to such types of claims will help individuals do so. By contacting a company and receiving compensation from their trust, victims do not have to initiate a lawsuit, which is needed to receive a settlement. Nevertheless, this process can still be confusing. Patients who suffered asbestos experience at the hands of a company are encouraged to contact an experienced lawyer who will know if a settlement trust exists, the most expedient way to receive compensation and any proof required from the trustee before a claim is evaluated.

A company’s bankruptcy does not mean they are penniless, nor does it provide release from the responsibility they have to individuals that underwent asbestos exposure at their hands. However, the development of a bankruptcy trust does usually mean victims will receive less compensation than originally anticipated because the company is held responsible for paying all victims involved at a reduced rate. Filing for Chapter 11 bankruptcy allows companies to continue operating while simultaneously compensating victims. Often, companies rebound from bankruptcy fiscally stronger than before.


  • Dixon, Lloyd, Geoffrey McGovern and Amy Coombe. (2010) “Asbestos Bankruptcy Trusts.” Retrieved on April 21, 2011 from Rand.