Atari's bankruptcy escape plan is court-approved

It's been less than a year since Atari filed for Chapter 11 bankruptcy , and today the Wall Street Journal reports the company has secured approval from both its creditors and the court for a plan to pay back part of its debt and exit bankruptcy.

If successful, the U.S.-based Atari Inc. (formerly GT Interactive) appears poised to act on its previously-stated intent to separate from French parent company Atari S.A. -- formerly known as Infogrames -- and establish itself as a purveyor of fine digital-only games.

Atari's comeback plan, approved by Judge James Peck in the U.S. Bankruptcy Court of Manhattan, requires the company to pay back a $3.8 million bankruptcy loan from Alden Global Capital. Atari also promises to pay its unsecured creditors "up to $560,000" when it exits bankruptcy, plus a matching amount the year after and then an extra $630,000 the year after that, for a total of roughly $1.75 million. That doesn't sound like a bad deal, especially in light of the fact that Atari's unsecured creditors are reportedly owed $10.3 million.

Atari is expected to pay the debts from a $3.4 million cash reserve, along with an extra $1.75 million the company will receive when it formally exits bankruptcy. Atari successfully sold offa number of its properties at auction this summer -- including Total Annihilation , Star Control and Master of Orion -- so it seems likely that the company is relying on that income to pay back its debts.

The loss of those much-loved franchises is likely to hamper Atari's efforts to become a major player in the digital games space, though it still has properties like Test Drive , RollerCoaster Tycoon and Fatty Bear's Birthday Surprise to fall back on.

Editor's Note: This news story has been updated to clarify that the current incarnation of Atari, Inc. was formerly known as GT Interactive, and is not in fact the original Atari.