Case Study, GM: How does bankruptcy impact damages owed?

Bloomberg reported this month that General Motors (GM) is being sued for an ignition-switch flaw in 2.2 million vehicles which is linked to 30+ deaths, resulting in a reduced resale value. The ruling of U.S. bankruptcy judge Robert Gerber will determine if GM will have to pay more than $2 billion in damages.

Gerber will rule on if GM is bears liability for vehicles it built and sole prior to its 2009 bankruptcy and if customers have the right to try to collect damages. More than 100 lawsuits filed on October 14 as two proposed class actions for those seeking to recover damages for the resale value losses.

Generally in cases like these contacting a local bankruptcy lawyer is the best bet one can have if they want to gain the upper hand in such case, as the local lawyers of the region will know better about the law of the land and its rules thus assuring them a definite advantage.
One class action suit seeks $10 million in economic damages for customers who purchased the flawed vehicles after the bankruptcy. That class action could could potentially have 20 million class members. The second class is made of customers who purchased the recalled vehicles before the bankruptcy.

GM says it has allocated $600 million in economic damages in instances of personal injury and wrongful death related to the ignition-switch flaw. The company says, however, that because of its bankruptcy, it is not obligated to pay economic damages to either of the classes of claiming losses related to the reduced resale value of the cars.

When a company declares bankruptcy it must declare liabilities, and GM did not declare the ignition-switch flaw as a liability when it filed for bankruptcy. If Gerber, who oversaw GM filing for Chapter 11, finds that the company misled him about the company knowing about the flaw the bankruptcy protection against paying economic damages can be invalidated.