Brown — Volume 61, Issue 3

Section 524(g) of the Bankruptcy Code authorizes the creation of asbestos bankruptcy trusts to channelize current and future asbestos-related liabilities, establishing equitable distribution among present and future claimants. However, Brown argues that the statutory design—which grants current claimants veto power over trust qualification criteria, settlement values, and governance—has fundamentally undermined the central bankruptcy policy of equitable treatment and maximized asset distribution. While section 524(g) theoretically requires independent legal representatives for future victims and mandates financial solvency for future claims, empirical data demonstrates systemic failure: roughly two-thirds of sixty established trusts have reduced payment percentages since 2010, with median payouts declining to fourteen percent. Nearly sixty bankruptcy trusts have distributed over fourteen billion dollars since 2006, leaving only eighteen billion to satisfy claims submitted over the next four decades. The article examines how current claimants' control over trust criteria incentivizes relaxed standards and inflated individual payments, leaving inadequate reserves for unknowable future victims. Brown proposes governance reforms, improved trust oversight mechanisms, and eligibility criteria modifications to restore protection of future victims' interests while honoring the Bankruptcy Code's twin objectives of asset maximization and equitable distribution.

Topics: Civil Rights

Keywords: bankruptcy trusts · section 524(g) · asbestos claims · future victims · equitable distribution · trust governance · veto power