General Motors will be forced into liquidation if its asset sale is not approved, according to statements by GM’s lead bankruptcy lawyer in court on Thursday. This marked the third and final day of hearings for GM in U.S. Bankruptcy Court.

GM is currently seeking approval from Judge Robert Gerber to sell its assets to a “new GM” that is currently backed by the government. If the deal wins approval, GM will be allowed to sell its strongest assets including its Cadillac and Chevy brands.

On Wednesday, auto task force member Harry Wilson said that if General Motors formed a new entity, it could make an initial public offering in 2010. GM CEO Fritz Henderson said during testimony that he does not expect GM to be profitable in 2009, and that sale is the only option if the company is to survive.

During Wilson’s testimony, he confirmed that the only way to save GM is through an asset sale to the “New GM.” But there is one catch to the sale: it must close by July 10, when the government--imposed deadline runs out and Uncle Sam $30 billion in financing to help the beleaguered auto maker.

"We cannot make an open-ended commitment," Wilson said in court of the looming deadline. "At one point, it's better to cut one's losses… We have no intention to further fund this company if the sale order is not entered by July 10.”

GM filed for Chapter 11 bankruptcy four weeks ago and is in its third day of hearings under Judge Robert Gerber to approve the asset sale. On Tuesday, the court ruled that CEO Fritz Henderson will remain head of the new GM.

During his testimony, Wilson said that GM has received around $10 billion in funding since it filed for bankruptcy. The U.S. Treasury would offer an additional $60 billion in financing to the “new GM,” which would give the government a 60% stake in the new company. Additionally, the United Auto Workers Union hold 17.5%, Canada would own 12%, and GM bondholders would own 10%.