The Effects of Automaker Bankruptcy on Injured People

By Dean I Weitzman, Esq. on June 5th, 2009

Earlier this week, President Obama announced news that has been expected for months — General Motors has filed for bankruptcy, with plans to emerge as a stronger, more viable “new” corporation. This announcement came just one day after Judge Arthur J. Gonzalez approved the sale of most of Chrysler’s assets to a new company, run by Fiat.

Neither event came as a great surprise; the financial troubles of both companies are well-known. However, in both cases, the bankruptcy plans incorporated unorthodox terms. Essentially, these bankruptcy plans leave injured people shouldering the burdens of the companies’ financial missteps.

Under these plans, neither emerging company will be responsible for ongoing car accident claims that attribute death or serious injury to negligence on the part of General Motors or Chrysler. Furthermore, neither plan has set aside any assets for an accident fund, which could be used to compensate people who are injured as a result of defective vehicles.

Victims of defective vehicles will be left with little recourse against the car manufacturers. Although injured people will be able sue the “old” companies, they will be forced to compete for very limited assets with other unsecured creditors, virtually ensuring that they will never receive any compensation.

To ensure the future of the American automobile industry, it is important that Chrysler and General Motors are able to restructure. This requires a difficult balancing of competing interests and many people are bound to be unhappy with the terms. This is unavoidable. However, this restructuring should absolutely not come at the expense of seriously injured people.