Remember when Chrysler went bankrupt? During the early days of that financial catastrophe, Chrysler tried stealing a bunch of customers' cars, including my client's.

Chrysler and GM both went bankrupt in 2009 and shock waves rolled through the automotive community. I handle lemon law claims in Michigan and, at that time, was curious about how this would affect the people I worked with – consumers and other attorneys. At any given time, I have pending cases against each of the Big Three and at the exact date and time Chrysler was getting ready to pull the trigger on their filing, I had a client whose defective car was being bought back by Chrysler.

Now, I understand that in a huge corporation like that, not everyone knows what is going on in every other department of the company. So it is understandable that the attorneys I deal with in Michigan were not privy to the top secret bankruptcy filing which was being prepared by another group within the company to be filed in New York.

The way a lemon law buyback works is that Chrysler sends the check to the dealer with instructions for the dealer to inspect the car, have the customer sign some documents, and hand them the check. My client's buyback was scheduled for the same day Chrysler filed.

When the news of the bankruptcy filing broke, I called my client immediately and told her to not go to the dealer. There was a good chance that the check waiting for her was no good. My client, being an industrious sort, called the dealer and found out that the salesperson she had dealt with was the one who was going to handle the buyback. And the buyback check was drawn on a bank which had a local branch. The salesman made her a photocopy of the check and she took it to the bank to see if it was good.


The teller told her, "If this check was presented right now, it would not be honored. This account has been frozen."

I called the Chrysler attorney I had been dealing with and he told me he had no idea what was going on. The filing had been a surprise to him as well.

I started researching the story and found other customers around the country – like my client – who had buybacks but had turned in their cars and gotten checks. Those checks were now no good. And Chrysler was not honoring them. As far as they were concerned, those checks were just more unsecured debt and the customers who had turned in their defective cars could get in line with everyone else who stood to get nothing. And no, they could not have their cars back.


So, my client dodged a bullet. At least she still had her car, albeit a defective one. A short while later, largely because of the backlash from this latest development hitting the news, Chrysler went to court and sought permission to make these checks good. My client turned in her car, got her check and it cleared. The other consumers whose checks were frozen were also made whole. But they had been sweating for a week or so.

I talked to another acquaintance of mine (NOT the Chrysler attorney above) who is an attorney and he was not so lucky. His firm handled large legal matters for Chrysler and Chrysler owed his firm a few million dollars. A few million. Chrysler had listed that debt among the many it could not pay and it was discharged. The firm got zero. At least Chrysler let them keep their cars.


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Steve Lehto has been practicing law for 23 years, almost exclusively in consumer protection and Michigan lemon law. He wrote The Lemon Law Bible. He also wrote Chrysler's Turbine Car: The Rise and Fall of Detroit's Coolest Creation. You can hear his podcast Lehto's Law on iTunes here.

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