NEW YORK (Reuters) -- A federal bankruptcy judge will decide the immediate fate of General Motors' effort to quickly sell its best assets to a group funded by the U.S. government, after a three-day court hearing ended.

The U.S. automaker wrapped up the final day of its sale hearing in U.S. bankruptcy court in Manhattan by asking Judge Robert Gerber for approval to sell its best assets to a "New GM" funded by the U.S. government.

GM is seeking approval for the sale just one month after filing for bankruptcy protection. Judge Gerber asked GM's attorneys to submit papers to him by Friday and is expected to rule before July 10 -- the date after which the government has said it could stop funding GM.

In court on Thursday, a group of dissenting bondholders urged Gerber to block the sale, calling it the first attempt at "Chapter 11 nationalization" and arguing the government was trying to circumvent the law.

‘Catastrophic' consequences

But GM's lead bankruptcy attorney, Harvey Miller of law firm Weil Gotshal & Manges, told the judge that anything but approval of the sale would have "catastrophic" and "irreversible" consequences for GM and the auto industry.

"The objectors are asking your honor to play Russian roulette," Miller told Gerber, in response to claims from the bondholder group that GM could pursue a more traditional Chapter 11 reorganization plan rather than a fast track sale.

"These are assets that will deteriorate in value, and that deterioration will be felt by all stakeholders," Miller said, noting that June auto sales this week showed GM was losing market share to Ford Motor Co.

This week GM's CEO Fritz Henderson, and Harry Wilson, a senior member of the Obama administration's autos task force, told the court the sale is GM's only option for survival. Henderson said he does not expect GM to make money in 2009.

If the deal were approved, New GM plans to operate the best parts of the old company, such as Chevrolet and Cadillac, with a less-expensive workforce, smaller dealer network, and much less debt. The "old GM," which would include unpopular brands and unneeded factories and liabilities, would be liquidated in bankruptcy court.

Dissidents object

Earlier in the court hearing on Thursday, Michael Richman, a Patton Boggs attorney representing a group that calls itself the "Unofficial Committee of Family and Dissident GM Bondholders," argued that the proposed deal had not been negotiated as a legitimate sale to an independent party.

Instead, he said the government determined what would be needed to make a "settlement offer" to "favored parties" such as the UAW, and then it decided on the price of the sale on the back end of the negotiations.

Richman said "it's not credible" that the U.S. government would turn on GM after providing the company with billions of dollars in support. He asked the judge to "call the bluff" that the government would walk away from the automaker if a deal were not done by July 10.

GM, however, has said the holders of more than 50 percent of the company's bonds support the sale and a lawyer for Wilmington Trust, the indentured trustee for much of GM's bonds, said his client was not willing to "take the risk" involved with a reorganization plan, which could further reduce bondholders' recovery.

Terms of the deal

Under the terms of the deal, the U.S. Treasury would provide $60 billion in financing to the new company, including a proposed $50 billion that would give the U.S. Treasury a 60 percent stake in the company.

The UAW would gain a 17.5 percent stake, the Canadian government would own about 12 percent, and GM bondholders would be expected to obtain about 10 percent of the new company.

A successful sale of GM's main assets would be the second big victory for the Obama administration's auto task force. It helped broker the sale of Chrysler LLC to a group led by Italy's Fiat S.p.A. last month. The task force's Wilson said in court this week that the government could conduct an initial public offering for New GM as soon as 2010.

GM's official unsecured creditors' committee said in court that it was withdrawing its limited objection to the sale due to new agreements over GM's wind-down budget and a deal for New GM to take on Michigan workers' compensation claims from Old GM.