OK, so let's honor the contracts.

The contract was between the company and the union (and thereby the union members). Not the company and then the taxpayers. The taxpayers never signed a contract with the unions.

So when a company augers into the ground, let's let it go all the way. Then the people on the other end of the precious contract receive nothing, because anyone who knows anything about tort law knows that liabilities on a contract die with the company that signed it.