Liability plaintiffs lose out as auto companies go bankrupt

The General Motors and Chrysler bankruptcies have derailed lawsuits from hundreds of consumers over injuries allegedly caused by vehicle defects.

A group representing more than 450 clients with lawsuits or settlements pending against the companies estimated that nearly $2 billion in damages was being sought.

“The carmakers and the administration have decided they are collateral damage in the interest of a quick and expedient bankruptcy,” said Clarence Ditlow of the Center for Auto Safety.

Don Wren of Liberty, Mo., is in the same position as hundreds of others with suits against GM.

Behind the wheel of his GM car in 2004, Wren was in a head-on collision and his legs were crushed. His right leg was later amputated.

His lawyers contend his injuries were made worse because of a safety defect in the vehicle. The case was scheduled for trial next month but has now been stayed.

In pending lawsuits, the company withdrew all settlement offers on May 1, a month before its bankruptcy.

Likewise, anybody who had settled a case with GM or won a court award had to receive the money by April 30. Those who didn’t are now waiting in the bankruptcy line.

Under federal bankruptcy rules, virtually all the liabilities of the old GM and Chrysler will stay in bankruptcy when the new companies emerge.

That means people suing the companies and winning an award would merely be unsecured creditors — at best receiving pennies on the dollar.

In GM’s case, there likely will be nothing left because it entered Chapter 11 with $180 billion in debt and little value in the assets that will be sold.

Consumer groups are outraged with how the bankruptcies are playing out, alleging the absence of corporate accountability and government responsibility.

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