Lehman Brothers took a giant leap forward toward settling its estate with creditors when a federal bankruptcy judge approved its $65 billion pay out plan.  Judge James Peck's approval will allow creditors to vote on the deal sometime this fall.

The disclosure statement has been months in the making and has been revised numerous times before it earned the support of major creditors, including Paulson & Company, Elliott Management and Goldman Sachs. The approved version now will be sent to the 110,000 creditors of the estate, who will have 60 days to vote.  If approved, a confirmation hearing will be held 12/6/11.

While some banks still had objections to the plan, Judge Peck overruled those objections for now, saying they would be heard in the confirmation hearing.  He called the approval of the agreement “an extraordinary and noble achievement,” and said that the lawyers on both sides had done work that “borders on miraculous” by bringing major groups of creditors into agreement on a plan.

Assuming now that shareholders vote to approve, Lehman hopes to begin sending out payments by early next year.   [DEalbook,8/30/11]