Lynchburg-based Peanut Corp. of America filed for bankruptcy listing nearly $11.4 million in assets and debts of $4.8 million Friday in U.S. Bankruptcy court. The company was involved in one of the largest food contamination outbreaks in U.S. history that sickened 677 people in 45 states and may have contributed to nine deaths and led to one of the largest product recalls in U.S. history.

The Food and Drug Administration has said that more than 2,670 peanut products have been recalled almost all of which contained ingredients made at the company’s plant in Blakely.

This could indicate that consumers who were sickened in the outbreak may have trouble recovering damages from company accounts because assets listed in the bankruptcy filing will likely go to other businesses that bought its products.

Out of the nearly $11.4 million in assets more than $7 million listed as assets was in insurance that covers the company's products and will not be used for claims by consumers. Trustee Roy V. Creasy said the money would be used to compensate businesses that had bought Peanut Corp. products that were recalled.

Peanut Corp. in the court papers filed Friday listed $11.3 million in assets including its $2 million interest in the South Georgia plant and surrounding eight acres. The company also listed a $1 million insurance policy with AIG for recalls and listed $4.7 million in money owed, including debts to banks and government agencies. The court papers said the company’s income for the fiscal year ending in September was $19.6 million.

Peanut Corp. filed for Chapter 7 bankruptcy last month and companies file Chapter 7 to liquidate their assets and distribute the proceeds to creditors. The bankruptcy will focus on identifying company assets, converting them to cash and distributing it. Roy Creasy, the trustee appointed by the U.S. Trustees Office to run the bankruptcy said the process could take a year.

Bankruptcy experts said according to the law those who have first claim include secured creditors, such as those with liens against the company. Employee wages and pensions would also be high on the priority list but creditors and victims filing claims would be lucky to get what they claimed for.

Also on the bottom of the list would be food producers who had to recall their products because they used Peanut Corp. ingredients in the food. One such company is Kellogg, which used Peanut Corp. ingredients in some products, it said the recalls could cost it as much as $70 million.

About 100 businesses in Georgia and 500 nationwide did business with Peanut Corp. and Georgia businesses which include peanut growers, food producers, candy companies and food stores, were named in documents filed Friday as part of the company’s liquidation bankruptcy.

Attorney Bill Marler, a Seattle lawyer who has filed several suits against Peanut Corp. said he expects his 85 clients to be paid through the company's personal injury insurance policy, which is separate from the assets tied to the product insurance.

Experts said that by filing for bankruptcy Peanut Corp. is protected from creditors and others seeking money that is owed to them. The company would in general only pay out what is obtained through its insurance and the sale of assets and all lawsuits seeking money must now become part of the bankruptcy.
The filing Friday by attorney Andrew S. Goldstein listed more than a dozen lawsuits against the company related to the outbreak as well as more than 475 businesses with claims against the company.

Creasy said next week’s initial meeting of creditors will focus on identifying the company’s assets and initiating the process of selling them. He added that Peanut Corp. president Stewart Parnell may decline to speak at the first meeting as he did during the recent Congressional hearing on the salmonella outbreak.

Peanut Corp.’s bankruptcy proceedings, scheduled to begin Thursday in Virginia and the case has chances of becoming complicated since Hartford Casualty Insurance Co., an insurance company for Peanut Corp., has filed a lawsuit to question whether the insurer must cover damages from claims filed by victims in the salmonella outbreak.

The FBI is conducting a criminal investigation of the company, and Peanut Corp.'s statement of financial affairs included a $100,000 payment for corporate criminal legal representation.