Washington Mutual Inc. filed a revised Chapter 11 bankruptcy plan; but says that they are billions of dollars short and are unable to cover all of its debts and reimburse its shareholders. Under the revised Chapter 11 bankruptcy plan, Washington Mutual will establish a liquidating trust that will distribute about $7 billion to creditors, JP Morgan will assume some benefit related liabilities for the company and several lawsuits against WAMU will be stayed or dismissed. Also JP Morgan and the FDIC will withdraw claims against Washington Mutual's bankruptcy estate and the parties will exchange mutual releases.
"This agreement will result in substantial recoveries to the receiver and resolve potential claims that could have taken years and millions of dollars to litigate," FDIC General Counsel Michael Bradfield said in a statement.
Washington Mutual said in a statement later on Friday that settlement was filed with the full support of the FDIC, JPMorgan, and the official committee of unsecured creditors.
"WMI has worked diligently over the last 20 months to maximize the value of the bankruptcy estate and is confident that the amended plan will accomplish the objective of providing substantial recoveries for WMI's creditors," Washington Mutual said.
If approved the Chapter 11 bankruptcy plan will end disputes and litigation related to $4 billion in cash that was in Washington Mutual's bank accounts in the thrift when it was taken over. Washington Mutual, JP Morgan and the FDIC have been fighting over these deposits plus billions of dollars in tax refunds for months. A bankruptcy court hearing is scheduled for June 3, 2010, to consider approval of Washington Mutual's disclosure statement. Once the disclosure statement is approved, Washington Mutual will ask the bankruptcy court to confirm their Chapter 11 bankruptcy plan by July 20, 2010.