ST. LOUIS • Saying all creditors of bankrupt US Fidelis need to “bite the bullet,” a federal judge on Monday signed off on a final settlement of the case that would pay about $26.5 million to the Wentzville company’s customers and creditors.

About $14.1 million will go in a restitution fund for the more than 600,000 consumers who bought US Fidelis’ vehicle-protection coverage, which regulators and state officials have dismissed as a scam.

The company’s vehicle-service contracts typically sold for $2,000 to $4,000. But the contracts were worthless, said the consumers who found that fine-print exemptions and liability caps often made it impossible to get repair bills paid.

Because it would cost more than $1 billion to reimburse all US Fidelis customers, state attorneys general, who are managing the restitution fund, will decide who is eligible and how much they’ll get.

At first glance, the biggest loser in Monday’s settlement appears to be Mepco Finance Corp., which provided financing to most consumers who bought US Fidelis vehicle-service contracts.

But the Chicago-based company gets something in return: protection from lawsuits stemming from US Fidelis’ shady business practices.

Mepco filed a claim of $58 million, and it lent millions more to US Fidelis after the bankruptcy filing in March 2009.

In the plan approved by U.S. Bankruptcy Judge Charles Rendlen III, Mepco gets about $6 million. It also gets the Cayman Islands beach house once owned by US Fidelis founder Darain Atkinson, who along with his younger brother Cory is awaiting sentencing after pleading guilty to state and federal fraud charges.

The Atkinsons already have surrendered their fortunes to the US Fidelis bankruptcy estate. In return, they received immunity from suits by any US Fidelis creditor.

Independent, vehicle-service contract sellers like US Fidelis — not affiliated with dealers or manufacturers — often folded before consumer litigation could run its course. The same principals would restart a telemarketing boiler room within months or weeks.

In recent years, more than 40 operated in the St. Louis area, usually from low-profile suburban offices.

But Mepco — the subsidiary of publicly traded Independent Bank Corp., based in Ionia, Mich. — is different.

A real business with permanent offices and deep pockets, Mepco would have been a ripe target for class-action suits at a time when its old business partners — the Atkinson brothers and US Fidelis — are broke.

But Mepco is now protected by a so-called “third-party release” in the bankruptcy settlement.

Bankruptcy courts seldom shield nondebtors from future litigation. But Rendlen told a courtroom full of lawyers for the attorneys general of four states and creditors Monday that it was “essential” this time to preserve money for consumers.

Without shielding Mepco, he said, “There wouldn’t be a dime for consumers — not one dime.”

Mepco had said that without protection, it would have sought virtually all US Fidelis assets. Other creditors and attorneys general would have objected, but the protracted legal fight would have drained the US Fidelis bankruptcy estate and dragged out a process that already has lasted 21⁄2 years.

Monday’s plan bypasses that roadblock.

“It puts the most possible dollars in the (hands of) the most possible people in the shortest amount of time,” said Hal Morris, an assistant Texas attorney general.

Despite the objections of three California consumers seeking to form a class action against Mepco, the plan approved Monday had the overwhelming support of creditors who cast ballots on whether to accept it. In addition, it was approved by attorneys general from the District of Columbia and 29 states, including Missouri.