Coal producer Walter Energy Inc. has been granted approval from a federal judge to reject its collective bargaining agreement with union workers.

The ruling released on Monday means the bankrupt U.S. company can stop paying retiree benefits and move forward to sell off its Alabama operations.

The U.S. Bankruptcy Judge for the Northern District in Alabama Tamara O. Mitchell has rejected objections by funds that are responsible for paying retiree and health benefits to former miners from the company, according to Bloomberg.

After two days of hearing, the federal judge found that Walter Energy's assets can be sold without any obligations for the company to pay union benefits.

Judge Tamara Mitchell said in a 57-page opinion that the court overruled the union workers' objections as it concerned to maintain the coal operations and keep the mines from closures.

The federal judge said that the ruling will lead to open future job opportunities and raise the productivity.

Mitchell said that the court finds credible that no potential buyers have an interest in assuming such obligations. She assumed an offer to buy the company wouldn't go forward without such ruling.

Hoover-based Walter Energy filed in bankruptcy in July. According to Reuters, the company is set to put its assets up for auction on January 5. Judge Mitchell will be asked to approve the auction results at a sale hearing on January 6.

The company 's lenders who banded together as Coal Acquisition LLC have placed an opening bid to purchase Walter. If the purchase agreement goes through, Coal Acquisition would exchange $1.25 billion owed by Walter, and pay up to $5.4 million in cash for Walter's assets. Coal Acquisition would assume $115 million to $122 million in liabilities.

Mitchell said that if the purchase agreement fails to close, Walter will have to immediately shut down its mines in Alabama and sell assets gradually. The ruling also approved Walter to pay $2 million in retention bonuses to key employees.

The United Mine Workers of America (UMWA), which had objected to Walter's plan to end retiree benefits, said that the Monday ruling is disappointing, but not surprising, according to Birmingham Business Journal.

The UMWA represents more than 1,280 current and laid-off Walter employees along with 2,700 retirees and dependents.

The UMWA International President Cecil E. Roberts said that the law is stacked against workers in American bankruptcy courts. The negotiations between the UMWA and Walter are underway this week, with the hope that an agreement can be reached.