A federal judge has rejected the Chapter 11 repayment plan of defunct auto-parts maker First Brands Group, ordering the case converted to a Chapter 7 liquidation after concluding that a proposal to fund creditor recoveries through litigation against insiders was not realistic.
US Bankruptcy Judge Christopher Lopez ruled Monday that the plan, which would have established litigation trusts to pursue lawsuits against company insiders and business partners, failed to guarantee that administrative claims — which hold priority status under bankruptcy law — would be paid in full within a reasonable timeframe. The decision effectively ends the company’s effort to reorganize and hands control of its remaining assets to a court-approved…