General Motors’ plan to emerge from bankruptcy, with a lot of help from the federal government, has been approved by a federal judge.

Judge Robert Gerber gave his approval late Sunday after three days of hearings last week, saying it “is the only available means to preserve the continuation of GM’s business.”

Under the plan, the Detroit-based automaker, which filed for court protection on June 1, creates a new company and sheds crushing debt and expensive contracts.

Under the plan, which was worked out between the struggling company and the Obama administration, U.S. taxpayers end up owning 60% of the “new GM,” with other stakes held by Canadian governments, bondholders and the United Auto Workers union.

Holders of $27 billion in GM (GMGMQ) bonds get stock in the reorganized company, as will a union-controlled trust fund that will take stock rather than the $20 billion in cash it had been owed to pay future retiree health care costs. Those 650,000 retirees will have their coverage reduced.

But the U.S. Treasury had conditioned its aid on approval of a bankruptcy plan by July 10, and Gerber addressed that in his ruling.

“GM cannot survive with its continuing losses and associated loss of liquidity, and without the governmental funding that will expire in matter of days,” Gerber said in the decision.

Pared down: GM plans to close more than a dozen factories, drop U.S. brands and shut down up to 40% of its network of 6,000 dealerships.

A successful and swift move through bankruptcy was crucial to GM’s restructuring and a key test of the Obama administration’s efforts to rescue GM and Chrysler.

Chrysler’s bankruptcy was approved on June 1, just hours before GM entered Chapter 11. An attempt by creditors to block the Chrysler bankruptcy was turned back by the U.S. Supreme Court.

The nation’s other automaker, Ford Motor (F, Fortune 500), did not accept funding from the government in its effort to recover from the industry slowdown. Last week, Ford reported an 11% decline in year-over-year sales for June, the smallest drop of any major automaker.

In a move that could smooth its restructuring, GM filed documents in U.S. Bankruptcy Court in New York saying that it had agreed to accept legal responsibility, post-bankruptcy, for drivers who are injured by vehicle defects in old cars.

(Source: CNN Business)