NEW YORK — Residential Capital LLC, the mortgage-loan division of Ally Financial Inc., filed for Chapter 11 bankruptcy protection in New York Monday.
The firm said it is unable to make payments on debt taken out to finance soured home mortgages.
The filing will separate the money-losing unit from Ally's auto loan and banking businesses, allowing them to speed repayment of Ally's bailout from 2008 and 2009, Ally said in a statement.
Ally, which is 74 percent owned by the U.S. government, was the financial arm of what was then General Motors Corp. until the banking-industry meltdown in 2008. It received a $17.2 billion bailout to survive the downturn and has repaid about $5.5 billion.