A US bankruptcy court has ordered First Brands Group into liquidation, rejecting a complex restructuring plan aimed at pursuing claims over $25bn paid out before its 2025 bankruptcy. Judge Christopher Lopez of the Houston bankruptcy court described the Chapter 11 reorganization plan as “unconfirmable under any circumstances,” citing defects that violated bankruptcy laws.

The rejected plan would have created a litigation trust funded by senior lenders to finance lawsuits against insiders like founder Patrick James and off-balance-sheet lenders. Lawyers for the bankruptcy estate warned that liquidation under Chapter 7 would be “devastating for all junior creditors.” The company, known for brands such as Autolite and Trico, failed to attract buyers during its 11 months in Chapter 11, burning through financing and accumulating nearly $2bn in new liabilities.

James faces criminal fraud charges regarding fabricated invoices and double pledging collateral, while two senior executives previously pleaded guilty. FBI agent Kareem Carter stated James operated the company as a “Ponzi” scheme. With $9bn in debt at case start, most funds are now at risk. Lopez noted there is “nothing left to reorganise,” leaving the path for civil litigation in a Chapter 7 scenario unclear.