This has created a brewing consumer-confidence problem for Chrysler at exactly the wrong time. Most state lemon laws give car buyers the right to lodge complaints if a vehicle cannot be fixed. For instance, in California, if a defect cannot be repaired after four attempts (or two, if the malfunction could endanger lives), the owner can ask for a cash payment or for the automaker to buy back the vehicle. If an automaker refuses, the individual can sue.
Now, buyers who have put the lemon law to use are standing in line behind the rest of Chrysler’s unsecured creditors. Chrysler has acknowledged the problem but has not asked for permission to pay the debts. For now, owners of lemon Chryslers can appeal to the bankruptcy judge, but lawyers involved with lemon law suits do not seem optimistic about the prospect of full settlements.
This means former Chrysler owners could be holding checks ranging from $2,000 cash payments to $40,000 buybacks that are at best worth pennies on the dollar and at worst worth nothing.
Chrysler Bankruptcy Creates Lemon Law Turmoil (L.A. Times)