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Bankruptcy

: Credit Slips

The Footwear Begins to Fall

By Stephen Lubben

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Chrysler has filed its motion (Docket No. 780) to reject about a quarter of its dealership agreements. And while I don?t want to become as grumpy as this guy, it would be nice if the press could accurately relay the relevant legal rules. For example, the Los Angeles Times (via the AP) reports that dealers "can appeal" Chrysler?s decision. What? Even before the court has heard the motion?

More to the point, does anyone think that an objection to the motion will get the dealers much more than a legal bill? I can think of instances where motions to assume and assign have been rejected by bankruptcy courts, and even those are pretty rare, but I can't think of a single straight rejection motion being denied. And here Fiat has already said it won?t take an assignment of these dealerships ? so unless the government wants to get even more ensnared in this case, and I sure hope not, there is really no point in denying the motion.

The L.A. Times story does, however, highlight the collateral damage that will likely result from both Chrysler and GM?s chapter 11 cases. The dealerships in question are often important employers and community members in their towns. While every large chapter 11 case has adverse consequences for the small businesses that rely on the debtor, the effect will be magnified by the sheer size of the automakers.

(The reference in the title confirms that bankruptcy professors are generally as geeky as you always suspected).

Full post as published by Credit Slips on May 14, 2009 (boomark / email).

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