Lehman Brothers Holdings Inc's record $639 billion (406.8 billion pound) bankruptcy ended on Tuesday, clearing the way for it to start distributing about $65 billion to creditors starting on April 17, court documents show.

Lehman has said that it expects that first group of payments to creditors to be at least $10 billion.

Lehman, now a small fraction of its former size, collapsed on September 15, 2008 with $639 billion in assets, rocking the foundations of the global financial markets and catalyzing the Great Recession.

Exactly 1,268 days later, the legal end to the case enables Lehman to start paying back the creditors, which include Wall Street firms like Goldman Sachs Group Inc and hedge fund investors such as Paulson & Co, which together had asserted more than $300 billion in claims.

But Lehman Brothers will live on for some time as a sliver of its former self, selling assets and continuing to operate in its midtown Manhattan headquarters, where it is down to two floors.

The company, whose assets include $35 billion in cash, is due to make a second payment in September and then will continue to make periodic distributions in the future as it sells off its remaining holdings.

During bankruptcy, Lehman sold assets, settled claims, and negotiated a plan with its investors on how much to pay back each class of creditor, pitting it against its one-time trading partners, and some of them against each other.

After months and years of negotiations, the groups reached an agreement and Bankruptcy Judge James Peck approved their creditor payback plan in December. Since then, Lehman has tied up loose ends: selling more assets, litigating more claims and settling disputes with affiliates and counterparties.

Now that it is out of bankruptcy, Lehman no longer needs to ask court permission for every asset sale or corporate decision. And the company will continue to liquidate the remaining expected $30 billion worth of assets under a new board of directors.

While bankruptcy is legally behind Lehman, the court process will continue for an uncertain number of years as various claims and suits work their way through the system. As of January, it had spent more than $1.58 billion on professional fees, including lawyers and advisers.

In the past week, Lehman has reached a settlement with its U.S. broker-dealer unit over $7.9 billion in disputed claims, resolved key tax disputes with the Internal Revenue Service and reached a deal to reduce by $1.3 billion a claim from its Bermuda insurance unit.

The company in February sued Citigroup Inc over $2.5 billion transferred to Citi in the months leading up to its bankruptcy. In January, it bought a $1.325 billion stake in apartment company Archstone, a firm in which it already owned a 47 percent stake, in an ongoing effort to control and eventually liquidate the company.

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, Nick Brown and Jon Stempel; Editing by Gerald E. McCormick)