Asbestos Companies and Bankruptcy

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Asbestos litigation has been ongoing since the 1970s. It might seem natural to assume that the companies that made asbestos products would be, at this point, bankrupt and unable to pay the settlements and verdicts against them from victims of asbestosis, asbestos lung cancer, and mesothelioma. This is not the case. These companies are more than capable of paying for the damage they have caused, even if they have filed for bankruptcy.

Corporate bankruptcy differs from bankruptcy for individuals. In essence, bankruptcy is a reorganization of debt that is mandated by a court of law. When companies that formerly made asbestos products find themselves unable to cover the debt incurred by the litigation they are involved in, they may ask the courts to intervene.

In order to avoid losing all of their assets, these companies set up trust funds comprised of the corporations’ cash, insurance, and a majority of their stock. The profits that would normally go to stockholders are instead held in these trusts. When a claim is filed against an asbestos manufacturer, the money to pay the victims who have been hurt or killed by their products comes out of these trusts, even though the company is legally bankrupt.

This fact is of particular importance to victims of asbestos-related illnesses and their families. Mesothelioma, in particular, has an abnormally long latency period. Realization that an individual has contracted mesothelioma due to asbestos exposure may come long after the company that is responsible has filed for legal bankruptcy. Fortunately, justice may still be pursued through an asbestos claim that can be paid for from the trusts set up for this very purpose.

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