The Unfortunate Byproduct of Some Corporate Bankruptcies

Submitted by Jen Jones on Sat, 07/25/2009 - 4:01pm

The Unfortunate Byproduct of Some Corporate Bankruptcies

Sometimes, corporate bankruptcies can have a lasting, devastating impact on people. However, it's not always because of a loss of stock dividends, employment benefits or monthly paychecks. Sometimes the pain is literal.

For many, the General Motors and Chrysler bankruptcies mean that a number of defective automobile lawsuits will not see the light of day or at the very least, will be delayed for years while those injured continue to live in pain and with life-altering disabilities. To no surprise, the resulting medical bills that pile up with little hope for company compensation often result in financial agony as well.

A couple in Connecticut, the Polios, filed a suit against Chrysler for a defective roof in a Grand Cherokee, which they say led to Jeanne Polio's paralysis after an accident. Chrysler cited that the vehicle's roof met all safety standards at the time and that production errors were not to blame. Now, as a result of the auto manufacturer's bankruptcy, the Polios may not get their day in court. However, Connecticut Attorney General Richard Blumenthal sees things differently.

Recently, Blumenthal announced a renewed effort to fight the Jeep maker's attempts to skirt product liability issues that are becoming more evident in their older vehicles. The company's bankruptcy gave birth to "New Chrysler" which, according to Blumenthal, wants all of "Old Chrysler" except its lawsuits.

Joining the fight against Chrysler will also be the Pullano's of Niagara Falls. While trying to jump start their Jeep Cherokee, the truck lurched forward and rolled over Nicholas Pullano, leaving him paralyzed. Chrysler is also averting blame in their case. Because of the bankruptcy, the Pullano's case has also been set aside.

Both the Pullanos and Polios are simply asking for the case to be heard by a jury.

Chapter 11 bankruptcies have numerous benefits for the subject company. One of them is the ability to shed negative assets. The medical claims against Chrysler are certainly tragic (and even more so if continually delayed) but avoiding law suits is critical for all corporate entities. Chrysler and General Motors happen to be in very unique situations. Not only were they deemed "too big to fail" and thus granted special attention by the government, their very existence keeps thousands of Americans employed. Thus, it's exceptionally difficult for regular folks to be heard above the din of the companies' collective demise and subsequent resurgence.

Needless to say, consumer advocacy groups are livid. Last month, the publisher of Consumer Reports magazine sent a letter to the Treasury Department's Auto Task Force on the matter. Among other points, the letter read, "If these newly reorganized auto companies are restructured 'free and clear' of these suits, it would mean that consumers who bring successful claims for injuries or damages caused by defective GM and Chrysler vehicles would be left without recourse, since these individuals would be considered unsecured creditors. That status would put them at the end of the line to be repaid from the meager assets left over once secured creditors were taken care of.-

For many people across the country who may have been injured by poor car production, the above words are a harsh truth to face while in a wheelchair. Despite the array of benefits, sometimes corporate bankruptcies leave a lot more behind than bad debt.

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