Effects of Economic Downturn and Automotive Bankruptcies

Healy Scanlon Law FIRM

This is the next of a series of columns on how the law can impact your life. Each month we will focus on various aspects of the law relating to personal injuries, those that happen both on-the-job and otherwise, including mishaps which occur in driving vehicles, using products and receiving medical care. The column will also respond to legal questions relating to personal injury that are sent to us.

Healy Scanlon Law Firm is comprised of eight trial attorneys, two of whom are from Ireland. We are located downtown at 111 West Washington Street, Suite 1425, Chicago, Illinois 60602 ( 312-226-4236). The firm concentrates in the representation of injured victims of all types of accidents.

Readers are encouraged to call or write with questions concerning personal injury law.


The recent economic downturn and bankruptcies have impacted every American one way or the other. With the unemployment rate at around 10%, millions have lost their jobs. With foreclosure rates at unprecedented levels, a countless number of families have lost their homes. For the first time in recent memory, unions and employees have agreed to pay cuts and unpaid furloughs. Less publicized, but in some cases more devastating, are the impacts on seriously injured individuals from the automotive bankruptcies.


It is estimated that GM and Chrysler have approximately 100 million vehicles on the American roadways (National Auto Dealers Association Statement to the Commerce, Science and Transportation Committee, U.S. Senate, June, 2009). It is also estimated that these vehicles represent a substantial portion of all automotive deaths and injury claims (National Highway Transportation Safety Administration). U.S. taxpayers are in the process of pumping $40 billion or more to these companies. So what protection does the G.M. / Chrysler vehicle owner-taxpayer get from all the governmental support? Those same taxpayers consumers have virtually no protection for injuries and death from defects in these vehicles. Under the terms of the Chrysler bankruptcy, all the good assets of Old Chrysler were sold to the new Chrysler (comprising Feat, the U.A.W. Union and the U.S. and Canadian Governments). Claims arising before the bankruptcy would have no access to the new Chrysler assets only to the Old Chrysler, effectively wiping out the claim.

Also, claims in the future arising from any defects in the estimated 33 million Chryslers on the road would have no opportunity to make a claim against Chrysler. So all those quadriplegics, paraplegics and brain injured individuals, whose injuries resulted from defects in Chrysler vehicles would have no claim. The same consumer / taxpayer who supported Chrysler with tax dollars would be left out in the cold if injured by a Chrysler product.

The G.M. bankruptcy closely followed the Chrysler bankruptcy . Due to the outrage of many individuals, including consumer advocates, consumer attorneys, state Attorneys General, and many politicians, the new G.M. was forced to recognize the future claims of victims of defective G.M. products. But the hundreds of seriously injured individuals (many paralyzed and brain damaged), who had a claim before the bankruptcy saw their chances of a fair recovery wiped out. That situation created another anomaly. If a person was seriously injured from a G.M. vehicle defect, i.e. faulty tire, seat belts, or roof protection just after the filing of bankruptcy, there would be an opportunity to recover. If another person driving the same type of G.M. vehicle with the exact same defect was seriously injured, a day before the bankruptcy, there would be absolutely no opportunity to recover.

But the irony goes on. Those significantly injured before the bankruptcy whose claims were wiped out and who do not have sufficient personal assets, will have to resort to federal and state aid. So the same taxpayers who supported Chrysler and G.M. with a bailout will again have support the victims of Chrysler and G.M. defective products through Medicare, Medicaid and other sources of governmental aid.


The final status of victims is still fluid because of pending legislation in Congress. However, when such fundamental rights, as the right to recover just compensation when a person is wronged, are altered, great care must be exercised to ensure that basic fairness is afforded to, in many cases, the helpless victims.

For many victims, their day in court was not only an opportunity for just compensation, but also an opportunity for vindication for them of many personal issues. Many had looked forward to their “day in court” for many years. They were devastated when it was abruptly taken away. Representing a number of these individuals, we have seen first hand what they have gone through and know what they will go through for the rest of their lives without any hope of their “day in court” or any fair compensation.

With the Chrysler and G.M. bankruptcies, the ball was certainly dropped, when it came to victims of the defective automobiles.

By: Martin Healy, Jr.
Jack Cannon