Next Week in Bankruptcy

Supplement company Natrol Inc. heads to bankruptcy court Wednesday in Wilmington, Del., to see if it can sway a judge to sign off on a creditor-payment plan that’s being held up by a disputed settlement.

Judge Brendan Shannon refused to approve the plan at a May 12 hearing, saying he had “a very bad feeling” about some things happening in the case. At issue is a settlement between Natrol’s current owner, Aurobindo Pharma , and the former owner that sold it during the bankruptcy proceeding, Plethico Pharmaceuticals Ltd.

Judge Shannon said the settlement, which would see Aurobindo get $23.3 million back of the $132.5 million it paid for Natrol, needed more scrutiny. The settlement would put to rest fraud allegations Aurobindo aimed at Plethico accusing the company of draining some $25 million out of Natrol through an allegedly fake construction contract.

Natrol’s sale brought in enough money to pay off all of the supplement company’s creditors, but until the payment plan gets approved, creditors are still waiting for their checks.

Complicating the situation is Plethico’s own insolvency proceeding in India. Bondholders that have been trying to collect their money say the proposed settlement runs afoul of an Indian court order that forbids Plethico from transferring its assets.

In a nearby Delaware courtroom Wednesday, RadioShack Corp. will ask a judge to approve the sale of its intellectual property to Standard General LP.

Standard General, the hedge-fund firm that saved more than 1,700 RadioShack stores from liquidation, was at risk of losing the right to use the iconic electronics retailer’s name. That changed May 12, when it was declared the winner of an auction for the trademark and other intellectual property with a $26.2 million bid.

The win grew out of a two-day bidding competition in New York, where Standard General faced rival bidders for the well-known brand.

RadioShack filed for chapter 11 bankruptcy protection in February and shut down or sold off almost all of its 4,000-store chain, trying to pay off more than $1 billion in debt.

The stores Standard General saved will be rebuilt around a streamlined array of necessities, to be sold alongside Sprint Corp. wireless products.

Besides the trademark, Standard General picked up rights to RadioShack’s customer data. The firm has worked closely with the attorneys general of several states to assuage privacy concerns.

Outside of court, a U.S. House of Representatives judiciary subcommittee is scheduled to meet Tuesday to assess the success of the U.S. Trustee Program, the bankruptcy-watchdog arm of the Justice Department.

The meeting was initially scheduled to take place in the fall, and in advance of that date, U.S. Trustee Program head Clifford White outlined his agency’s recent accomplishments.

Those included preventing executives from receiving bankruptcy bonuses and protecting consumers from mortgage servicer violations.

Battling bonuses has been a primary concern at the U.S. trustee’s office, particularly those that appear to award executives just for sticking around during a bankruptcy.

Mr. White said in his testimony that the changes his office has sought include eliminating top executives from those eligible for bonuses or imposing stricter milestones that must be met prior to getting paid.

-Peg Brickley contributed to this article.

Write to Sara Randazzo at [email protected]. Follow her on Twitter at @sara_randazzo