Chrysler bankruptcy puts lemons in limbo

Consumers who filed lemon-law claims against Chrysler recently are facing a troubling reality: Many settlement checks are bouncing, and consumers have no idea when they'll be repaid.

Chrysler says it's working to reissue the checks, or to return the troublesome vehicles to consumers so they'll have something to drive while the ordeal is worked out. But car owners whose cases are in front of a judge might be out of luck: Bankruptcy law allows companies to clear pending lawsuits.

"Right now, we're under the conventions and rules and laws of the bankruptcy court," says Mike Palese, spokesman for Chrysler. "While we can do everything we can to help our customers, there are a small number of cases where our hands are tied."

Attorneys dealing with lemon-law cases fear more consumers will be affected if General Motors files for bankruptcy reorganization later this month. Georgia attorney Alex Simanovsky, who represents about 25 consumers affected by Chrysler's bankruptcy, says there are more GM customers potentially at risk because GM sells more cars than Chrysler.

Craig Kahn, an Ohio attorney, says he's worried some of his clients with open lawsuits will be "wiped out if they're not taken care of during bankruptcy."

"Unless we can get it resolved now, the anticipated result is that they're going to get nothing," he says.

Palese says Chrysler is working to honor all warranty claims, even those that are involved in lawsuits.

Lemon-law rules vary by state, generally covering the purchase of a new car. Owners who face repeated problems with their car can, in many cases, return the vehicle to the manufacturer, who in turn refunds their down payment and pays off the loan. Or, the buyer keeps the car, but the manufacturer cuts a check to account for the car's reduced resale value.

Chrysler's bankruptcy filing has left folks such as South Carolina resident Kevin Lancaster with a truck payment but no truck. He turned in his Dodge Ram 2500 as part of a settlement with Chrysler and got a check to pay off the loan. That check bounced, and now his bank wants him to repay more than $30,000.

He's still making the $600-a-month payments, even though Chrysler has the truck. "I figured that was the path of least resistance, at least for the short term," he says.