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Chrysler Bankruptcy: What Happens to Car Owners' Lawsuits?

By David Goguen on May 21, 2009 | Last updated on March 21, 2019

When U.S. car-making giant Chrysler filed for bankruptcy protection last month, the impact was felt immediately by car dealerships and employees. But closer scrutiny of Chrysler's bankruptcy plan shows that car owners who are injured from vehicle defects and faced with warranty problems could also lose big. 

That's because under Chrysler's Chapter 11 reorganization plan, plaintiffs who have filed lawsuits against the company are seeing their cases frozen as they wait in a long line of unsecured creditors, and car owners' rights in future suits may be limited, according to the New York Times. "The new Chrysler is willing to honor warranties on vehicles sold before or after the bankruptcy. But for personal injury lawsuits, Chrysler says it will be responsible only for problems with vehicles sold after the bankruptcy," the Times reports.

That means people who bought Chrysler, Dodge, and Jeep vehicles before the company's April bankruptcy filing likely won't be able to sue the carmaker for injuries from vehicle defects or "lemon law"-type problems in the future, under the bankruptcy plan as it currently stands.

Some plaintiffs with claims against Chrysler are taking matters into their own hands, lobbying to alter the carmaker's bankruptcy plan that is currently before Arthur Gonzalez, a U.S. Bankruptcy Judge for the Southern District of New York.  

An Indiana man who lost both of his legs in the aftermath of a car accident -- and sued Chrysler for an alleged design defect -- has traveled to Washington D.C. to meet with the Senate Judiciary Committee over Chrysler's bankruptcy plan and its potential impact on injured plaintiffs, the Indianapolis Star is reporting.

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