General Motors (GM), a car company, recently discovered a flaw with its ignition switch and it was forced to withdraw about over one million vehicles from the market, as reported by Reuters in a March 22, 2014 article. As a result, the government is trying to determine whether it concealed the “ignition switch defect when it filed for bankruptcy in 2009.”

Therefore, one of the major concerns is whether GM is responsible for “bankruptcy fraud by not disclosing the ignition problem,” or whether it completely disregarded the defect. One of the ways to determine whether this is true or not, is to evaluate the documentation that GM has turned over.

Also, a legal proceeding was commenced against GM this past week so that it could be found responsible for hiding the defect, since the claim is that GM knew about it prior to its bankruptcy filing.  When GM filed for bankruptcy and its plan was approved by the court, it became a new entity so the GM we have now would not be liable. However, the one prior to the filing would be for the defect.

A single suit was not filed but a class action was and it was brought in California federal court. The injured parties are looking for permission to be able to sue the old GM since it hid the defect. Moreover, it claims that GM had a duty to disclose the problem. Thus, the action is pending the court’s approval before it is able to proceed or not.

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