Judge Rejects WaMu Exit from Bankruptcy

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US Bankruptcy Court Judge Mary F. Walrath rejected Washington Mutual Inc.’s plan to exit bankruptcy and repay more than $7 billion to creditors over the number of parties being protected from lawsuits by the plan. Speaking from Wilmington, Delaware, Judge Walrath said she agreed with the central feature of the plan which would end legal disputes between Washington Mutual, J Morgan Chase & Co and the Federal Deposit Insurance Corporation (FDIC) over who was responsible for the failure of Washington Mutual, the nation’s largest bank.

However, the attorney for the bondholders who had initially opposed the exit plan, Evan Flaschen, said in a phone interview that it would be an easy thing for Washington Mutual to alter the plan to gain the judge’s eventual approval. Sure enough, in a statement over email, WaMu said it would modify its plan according to the court’s suggestions in order to obtain the approval of the judge.

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