Automaker's goal: Exit bankruptcy in 60 days

— -- Chrysler intends to use a section of the bankruptcy code in a bid to quickly emerge from Chapter 11 reorganization and forge its partnership with Fiat.

The Obama administration said Thursday that Chrysler will use Section 363 of U.S. bankruptcy laws to quickly sell its assets to a new company formed by its alliance with Fiat. The government hopes it can merge with Fiat and exit bankruptcy-court protection within 60 days.

Typically, a Chapter 11 restructuring can drag on for many months as creditors challenge plans that might pay them just pennies on the dollar. At least one class of creditors must sign on to the plan, says Mark Desgrosseilliers, a bankruptcy lawyer in Wilmington, Del.

Under Section 363, debt can be restructured and assets sold to a new company within two months if the bankrupt company successfully argues delays could derail a deal. The auto industry's ravaged state could help such a plea.

"Debtors say the market is collapsing," Desgrosseilliers says. "The buyer might not ... wait around."

Approval from creditors is not required, but the consent of major bondholders and other parties would go a long way toward persuading a court to OK the plan. In Chrysler's case, four large banks that hold the company's debt have endorsed the restructuring blueprint.

A speedy Chapter 11 also would avoid millions of dollars in legal fees, benefiting creditors. Section 363 bankruptcies have become more common in recent years, especially as the credit crisis has made it tougher to find buyers for troubled assets, Desgrosseilliers says. Still, he says, the Chrysler deal could be the biggest and most complex such case in history.

Despite the challenges, Desgrosseilliers predicts a judge will swiftly approve a Chrysler deal. "You have an enormous company that much of the Midwest depends on for their livelihood," he says.

But Douglas Bernstein, a lawyer in Bloomfield Hills, Mich., expects Chrysler's primary creditors to oppose plans to pay them less than their loans' value. The government "doesn't have control of the process. The worst thing somebody could do is predict it will be quick."