Now defunct Washington Mutual (WaMu) filed an amended reorganization plan with the US Bankruptcy Court to set up a trust to distribute $7bn of funds to creditors. The plan implements a global settlement agreement among WaMu, the Federal Deposit Insurance Corp. (FDIC) and JP Morgan Chase (JPM). Regulators seized the Seattle-based thrift in September 2008, making it the largest bank failure in US history. The bank’s assets were sold to JP Morgan for $1.9bn. Under the amended reorganization plan announced today, WaMu will establish a liquidating trust to make distributions to creditors on account of their allowed claims. The trust will distribute in excess of $7bn of funds, including about $4bn of previously disputed funds on deposit with JP Morgan. The amended reorganization plan comes after WaMu initially filed its reorganization plan in March. “[WaMu] is pleased to have reached this important milestone in the Chapter 11 process,” WaMu said in a statement (download here). “The proposed Plan will provide substantial recoveries for the Company’s creditors and reflects [WaMu’s] diligent efforts over the last 18 months to maximize the value of the bankruptcy estate.” The amended reorganization plan comes more than a year after reports emerged that the holding company for WaMu was suing the FDIC for more than $13bn in damages, alleging that the bank regulator violated the bank holding company’s rights in forcing the “fire sale” to JP Morgan. JP Morgan did not assume WaMu’s liabilities in the takeover of WaMu, including claims by equity or any senior or subordinated debt holders — but it did agree to absorb WaMu’s troublesome loan portfolio, famously heavy on option ARM mortgages. Write to Diana Golobay. Disclosure: the author has no relevant investments.