Chapter 11

Chapter 11 is a section of the U.S. Bankruptcy Code that allows a financially distressed company to reorganize its debts while continuing to operate. Many asbestos manufacturers have used Chapter 11 to address overwhelming numbers of asbestos injury claims, often resulting in the creation of a court-supervised trust to pay current and future victims.

Origin

Chapter 11 was established as part of the Bankruptcy Reform Act of 1978, which modernized U.S. bankruptcy law. Its use as a tool for resolving mass asbestos liabilities expanded after Johns-Manville Corporation filed in 1982, the first major asbestos defendant to do so, leading Congress to add Section 524(g) in 1994 to formalize asbestos trust arrangements.

Significance in Asbestos Context

For someone diagnosed with an asbestos-related disease, Chapter 11 directly affects which companies you can sue and how you recover compensation. When a defendant files for Chapter 11, lawsuits against it are immediately paused by an "automatic stay," and claims are eventually rerouted into a bankruptcy trust that pays a fraction of each claim's full value according to a set schedule. Dozens of major asbestos producers (including Johns-Manville, Owens Corning, W.R. Grace, Babcock & Wilcox, and U.S. Gypsum) have gone through Chapter 11, and their trusts now hold tens of billions of dollars set aside for victims. Your legal team will typically pursue both lawsuits against still-solvent companies and separate claims against the trusts of bankrupt defendants, so it matters that every product and worksite from your exposure history is documented.

Example Sentence

Because two of the manufacturers whose products my husband worked with filed Chapter 11 decades ago, our attorney explained that part of our compensation will come from bankruptcy trusts rather than from a jury verdict.

Related Terms

Section 524(g) Trust, Asbestos Bankruptcy Trust, Automatic Stay, Trust Distribution Procedures, Johns-Manville, Plan of Reorganization

Notes

• Ask your attorney for a list of every bankruptcy trust they intend to file against on your behalf. There are over 60 active asbestos trusts, and each has its own claim form and evidence requirements.
• Preserve all documentation of products you or your family member worked with or near (brand names, job sites, dates, co-worker statements), because trust claims often require product-specific proof of exposure.
• Be aware that trusts typically pay only a "payment percentage" of the scheduled value (often 10–25%), so total recovery from a bankrupt defendant is usually far less than what a jury might have awarded.
• Ask whether any defendant in your case has recently filed or is contemplating Chapter 11, as this can delay proceedings and change strategy; some companies have used the "Texas Two-Step" maneuver to push asbestos liabilities into a new entity that then files bankruptcy.