Lehman Brothers Holdings Corp, now just the odds and ends of the global financial behemoth that collapsed in September 2008, received court approval on Tuesday to exit bankruptcy early next year.

Lehman may now wind down its remaining operations, U.S. Bankruptcy Judge James Peck told a hearing in New York. Once a mammoth investment bank and brokerage, Lehman is now a collection of assets including real estate, private equity and banking investments.

Peck, who has spent more than three years overseeing the bankruptcy, choked up as he looked back on the largest ever bankruptcy, one that accelerated the global financial crisis and eroded confidence in markets worldwide.

My world changed when the Lehman cases were assigned to me, and so did yours, Peck told the courtroom.

Lehman proposed to the court on Tuesday that its bankruptcy exit occur no earlier than January 31, giving it time to prepare to stand on its own, and paving the way for payouts to creditors to start in 2012.

Unsecured creditors, depending on their type of debt, will receive from about 21 cents to 28 cents on the dollar depending on the type of security they held. Shareholders, whose stock in the company hit a high of $86.18 in February of 2007 according to Reuters Data, will receive nothing.

The company had $639 billion in assets when it went bankrupt. Some of that money was returned to brokerage customers in a separate proceeding. There remains $65 billion to be returned to creditors who have $450 billion in claims, a group that includes debt investors and trading partners from before the bankruptcy, like Goldman Sachs.

While Lehman winds down, it will continue to manage its holdings in real estate company Archstone, banks, asset manager Neuberger Berman and private equity.

Looking back to the long day that began on September 14, 2008, and continued into the bankruptcy filing the next day, Lehman's lead lawyer, Harvey Miller of Weil Gotshal & Manges, remembered how the meltdown started.

I see the chaos, the confusion and the distress on the faces of hundreds of Lehman employees flooding into the enterprise's headquarters at 745 Seventh Avenue in their attempt to gather their belongings before a potential lock-down

of the building, Miller told the court.

UNWINDING

At the time of the bankruptcy, Lehman was an international company with businesses and employees around the globe. Many of Lehman's 25,000 employees were saved by asset sales but thousands still lost their jobs. In the end, 23 different Lehman companies were included in the bankruptcy proceedings.

In bankruptcy, Lehman sold many of its assets, from valuable artwork to complex Wall Street securities; achieved settlements with creditors, investors and trading partners; and exited real estate leases like its Canary Wharf building in London and sold buildings.

The bankruptcy has been tumultuous, with lawsuits creating sideshows to the already complicated business of unwinding and valuing securities such as credit derivative swaps.

One of those legal cases put Lehman and Barclays executives on the witness stand to determine if the deal struck selling Lehman's bank to Barclays was fair.

At times, the bankruptcy has provided a deeper look at the kinds of conversations that took place in the months ahead of the company's collapse, when the credit markets were contracting and taking down competitors, such as Bear Stearns.

The weekend that Lehman collapsed, the banking system was in upheaval. Merrill Lynch agreed to sell itself to Bank of America, while American International Group struggled to stave off bankruptcy and then took an $85 billion rescue package.

Lehman's bankruptcy opened a new chapter in the financial crisis, one that many investors, policy makers, and bankers feared would result in widespread bank runs and collapses reminiscent of the Great Depression. The Federal Reserve, Congress, and other officials spent much of the rest of 2008 trying to limit the havoc wreaked by the financial crisis.

Lehman's own role in its downfall, particularly the actions of executives like CEO Richard Fuld, were also the subject of numerous investigations by government agencies.

Fuld was forced to testify before Congress and said that he did not know about an accounting tactic known as Repo 105 that made its balance sheet look healthier than it was. A bankruptcy court examiner said in 2010 that it had contributed to the company's decline.

Fuld and others at Lehman argued that many of their problems were due to investors who in the months ahead of its implosion sold the stock short.

POST BANKRUPTCY

Lehman attorney Miller told Judge Peck on Tuesday that only one objection remained among the thousands of claims that have been made against the company. That objection, which kept the proceedings from moving even more quickly, was withdrawn.

The Lehman wind-down plan, which 95 percent of voting creditors approved last month, was the end game to lengthy negotiations to a massive settlement. Under Lehman's plan for post-bankruptcy dealings, it will pay periodic distributions to its creditors.

It seems almost like yesterday that we started this journey. In another context to some of us it seems we have spent a lifetime working on Lehman, Miller said.

Fees for the Lehman bankruptcy's advisers and lawyers have totaled about $1.5 billion.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Caroline Humer; Editing by Steve Orlofsky and Tim Dobbyn)