The Chrysler bankruptcy is leaving some consumers falling through the cracks. That’s the complaint of a number of consumer groups who filed an objection to the Chrysler sale this week. According to the filing, current Chrysler owners may not be able to sue Chrysler in the future if claims arise due to product defects, including lemon law claims , class action claims such as those for defective engines, and personal injury claims. Even those who currently have claims against Chrysler may be left scrambling for pennies on the dollar or less says Clarence Ditlow, executive director of the Center for Auto Safety , which filed the objection along with several other consumer groups. In the bankruptcy filing, these consumers are being considered “unsecured creditors,” he says. That puts them at the end in line to be repaid from the meager assets left over after the new Chrysler buys the bulk of Chrysler’s current assets. The “new Chrysler” will be partly owned by Fiat, the union employees pension fund, and the U.S. and Canadian governments. According to the current bankruptcy filing, the “new Chrysler” is set to emerge from the process “free and clear of all other encumbrances,” says Scott Nealey of Lieff, Cabraser, Heimann, and Bernstein, LLP, an attorney who represents consumers with claims against Chrysler. “Since claims under state law for defective products are not included in those items Chrysler says it will assume, they are

by definition excluded, and the sale of the assets Chrysler proposes would be ‘free and clear’ of any liability,” says Nealey. “The sale of Chrysler as now proposed immunizes the new Chrysler from any liability for existing lawsuits and claims, even if a judgment has already been awarded,” says Larry Coben, who represents personal injury victims in the bankruptcy proceedings. He adds that the available funds will be dwarfed by the number of claims. “The old Chrysler is just going to become a shell of worthless assets, and all the creditors are going to be scrambling for pennies on the dollar, and I mean less than 10 cents on the dollar. Maybe no cents on the dollar,” says Ditlow. Asked about the claims, Chrysler spokesman Michael Palese says all litigation against the company is stayed by the bankruptcy process. “A lot of these issues will be addressed in court. Many of those decisions have not been made. They are all important decisions that affect many, many people’s lives and we intend to follow the law and abide by the decisions of the bankruptcy court.” Chrysler is the smallest volume seller of the domestic automakers. Now with General Motors CEO Fritz Henderson reportedly saying bankruptcy at his company is “probable,” the number of consumers left at the side of the road could multiply. — Eric Evarts

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Chrysler bankruptcy leaves injured consumers without recourse