State and local governments across the US have sought billions of dollars from the prescription painkiller company Purdue Pharma as a way to hold the company and the members of the Sackler family that own it accountable for their role in the nation’s opioids crisis – but a potential payout is now clouded in uncertainty after state attorneys general said settlement talks had broken down.

The attorneys general directly involved in the negotiations with the maker of OxyContin and the Sackler family said at the weekend they expected Purdue to file soon for bankruptcy protection.

“It seems that there will be little money for plaintiffs, if Purdue takes bankruptcy and the Sacklers are not kicking in any money for settlement,” said Carl Tobias, a professor at the University of Richmond School of Law.

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Nearly every state and about 2,000 local governments have sued companies in the drug industry over the toll of opioids, which have been linked to more than 400,000 deaths in the US over the last two decades.

The suits cast Purdue, based in Stamford, Connecticut, as a particular villain, saying the company’s marketing of its drugs downplayed addiction risks and led to more widespread opioid prescribing, even though only a sliver of the opioid painkillers sold in the US were its products. Other pharmaceutical giants, distributors and pharmacy chains are also being sued.

On Saturday, two state attorneys general leading settlement negotiations with the company, the Tennessee Republican Herbert Slatery and North Carolina Democrat Josh Stein sent an email to their colleagues saying talks were at an impasse and that they “expect Purdue to file for bankruptcy protection imminently”.

A Purdue spokeswoman and a representative of the family declined to comment on the email, which was obtained by the Associated Press.

The company has said for months that it wants to reach a deal that would settle all state and local government claims against it, but it has also threatened to file for bankruptcy protection. Bankruptcy would mark a major shift in the multi-district litigation being overseen by a federal judge in Cleveland.

It would probably take Purdue out of the first federal trial over the opioid crisis, scheduled to start on 21 October in Cleveland.

Paul Hanly, a lead lawyer for the group of local governments, unions, hospitals and others suing the drug industry in federal court, said in a statement that any breakdown in talks did not concern his group of clients.

Those plaintiffs, he said, “will continue to explore resolution of our clients’ claims against Purdue and the Sacklers, whether with or without the states and within or without bankruptcy court.”

A bankruptcy judge would have a lot of say over how to divide Purdue’s assets. The value of the private company, already relatively low, could continue dropping, leaving little to split among thousands of plaintiffs.

The company could also go out of business. That’s a big change from settlement proposals that would have kept the company operating in some form.

Under one proposal, governments could have seen $10bn to $12bn over time, including at least $3bn from the Sacklers as part of a deal that would have put Purdue into a “structured bankruptcy”.

Pennsylvania’s attorney general, Josh Shapiro, who has been part of the negotiations, said the attorneys general did not believe the deal would have been worth that much.

According to the email sent on Saturday, the company rejected proposals from the states that could have been worth less money but came with greater assurances that the Sacklers would deliver $4.5bn.

If the company files for bankruptcy, the relevant members of the Sackler family could still be exposed to lawsuits. At least 17 states have sued one or more family member, and Shapiro said he intends to join them. A group of eight leading family members has been sued.

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The Associated Press found last month that a system of trusts and companies makes it difficult to trace the family’s money.

“This will be a challenging road forward,” Shapiro said in an interview.