In 2009, General Motors (GM) filed for reorganization bankruptcy¹ under Chapter 11 of the United States Code and the case was widely considered to be one of the largest bankruptcies filed by a corporation ever filed under Chapter 11. As part of the reorganization, a “New GM” was formed and a judge relieved the new corporate entity of any liability that existed in relation to the old company. Due to the bankruptcy, GM survived and continued to do business.
In 2014, GM came under fire for reportedly producing millions of vehicles with faulty ignition switches and failing to issue the appropriate recall to correct the problem. Over the course of many years, the ignition switches caused at least 84 deaths, thousands of injuries, and millions of dollars in property damage due to accidents incited by the defect. Numerous accident victims and families of deceased victims wanted to bring legal claims against the manufacturing giant for losses suffered as a result of the injury. GM, however, challenged the lawsuits² by stating that the “New GM” could not be held responsible for any actions prior to the 2009 bankruptcy, which is when most of the vehicles were sold.
Bankruptcy judge rules in favor of GM
A federal judge recently ruled in favor of GM,³ stating that the “bankruptcy shield” effectively protected the company from any legal claims for issues pre-2009. GM did voluntarily form a compensation fund for victims, however, the company controls the amount that is paid and will not be subject to court decisions related to awards or settlements. This case demonstrates the kind of powerful protections that bankruptcy can provide from legal action.
Many people who are facing lawsuits, judgments, or other large bills may not realize that bankruptcy is an option for their relief. Simply ignoring lawsuits will generally result in a default judgment, which can affect your credit and make your financial situation even worse. Instead, you should always discuss the possibility of a bankruptcy to either halt a legal claim that is pending against you or to find relief from a judgment that already exists. Though most people are not facing potential legal claims as costly as General Motors had, knowing that judgments may be discharged can provide extreme relief in many situations, especially after a serious accident.
Contact an experienced Long Island bankruptcy attorney for help today
If you are facing a lawsuit or judgment and want to know whether or not bankruptcy is a potential option for you, do not delay in contacting the Law Office of Ronald D. Weiss on Long Island today. Mr. Weiss is a highly experienced bankruptcy attorney who understands how to evaluate your individual situation and come up with the best possible legal solution for you to regain control of your finances. If you are struggling to pay your debts and liabilities, call today at 631-271-3737 to find out how we can help you.
References:
¹http://money.cnn.com/2009/06/01/news/companies/gm_bankruptcy/
²http://www.reuters.com/article/2014/04/22/us-gm-recall-lawsuit-idUSBREA3L08H20140422
³http://money.cnn.com/2015/04/15/news/companies/gm-bankruptcy/