A bankruptcy judge Friday refused to confirm the Chapter 11 plan of Washington Mutual Inc., delaying a planned $7 billion payday for creditors of the company that was swept away in the financial industry crisis of 2008.

Judge Mary Walrath ruled the settlement underpinning the distribution scheme for Washington Mutual was fair and reasonable. The judge, however, found deficiencies in the Chapter 11 plan that will require correction if it is to pass legal muster.

A bank holding company, Washington Mutual filed for bankruptcy after losing its operating thrift, Washington Mutual Bank, to a regulatory seizure in September 2008.

The settlement that is the core of the Chapter 11 plan is with JPMorgan Chase & Co., which bought the thrift, and with the Federal Deposit Insurance Corp., which brokered the sale of the distressed thrift.

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