If GM’s bankruptcy isn’t finished by July 10, the U.S. Treasury Department could stop financing the restructuring. Fritz Henderson, President and CEO of General Motors, testified on Tuesday that if the sale of GM’s good assets to a new company isn’t approved by the U.S. Bankruptcy Court in time, the government could force a liquidation of all assets.

The deadline was set by the Obama administration to ensure that GM’s bankruptcy proceedings are quick and surgical. A lengthy bankruptcy could hurt GM’s chance for survival in the future.

GM’s President and CEO Fritz Henderson took the stand yesterday to encourage a quick bankruptcy for GM.

Henderson was questioned by lawyers representing consumer groups, creditors, union retirees and others, according to The Detroit News. Objectors to GM’s bankruptcy plan say that it is unfair to some groups who are currently owed money by GM. These groups will be partially paid back by the sale of GM’s bad assets, but will likely only receive pennies for every dollar they are owed. Similar objections were overruled during Chrysler’s bankruptcy earlier this year.

While the U.S. Treasury could legally force a liquidation of all GM’s assets if a sale isn’t approved by July 10, sources at GM remain confident that a liquidation is unlikely.

“Logically there wouldn’t be strong motivation to stop funding given its investment in GM and the progress made to date,” GM Spokeswoman Renee Rashid-Merem told The Detroit News.

If the Treasury Department were to force a liquidation, all GM assets would be sold off to repay the company’s creditors. In that case, all GM warranties and product liabilities would likely be void.

Under the current plan, GM will honor all existing vehicle warranties and take responsibility for any injuries or deaths due to vehicle defects that occur after the bankruptcy.

Image via The Detroit News.