NEW YORK, Nov 19 (Reuters) - A U.S. bankruptcy judge on

Wednesday ordered an independent investigation into auto parts

maker First Brands, allocating a $7 million budget to probe

allegations of fraud involving the company's use of third-party

financing for customer invoices.

U.S. Bankruptcy Judge Christopher Lopez in Houston, who is

overseeing the bankruptcy, did not decide who would conduct the

investigation, instead directing the U.S. Department of

Justice's bankruptcy watchdog to make an appointment.

First Brands' filing for bankruptcy protection has raised

concerns about opaque financing in the private credit market and

cast a spotlight on the potential losses for top financial

institutions like Jefferies and UBS exposed to

the company.

Lopez did not set an exact timeline for the publication of

the examiner's report, but he previously said he preferred a

"targeted" investigation that could be completed quickly.

"Showing up four months later with a report is not helpful

to anybody," Lopez said at a November 6 court hearing.

The company reported over $10 billion in liabilities and has

accused its founder and former CEO Patrick James of

misappropriating "hundreds of millions (if not billions) of

dollars" from the company in a lawsuit. James denies the

allegations.

First Brands is investigating the fraud allegations, but

several participants in the bankruptcy said that an independent

probe was also needed.

Lopez agreed, appointing an examiner to investigate the

company's use of invoice factoring, a process that it has used

to generate short-term cash flow.

First Brands sold customer invoices to third-party financial

institutions, allowing the company to collect funds before a

customer actually paid. The examiner will look into allegations

that First Brands double-sold some invoices to more than one

buyer, and whether First Brands held on to some customer

payments that should have been turned over to the purchaser of

an invoice.

The examiner will also investigate whether money was

transferred out of First Brands to its affiliates or related

companies.