Chrysler closed its US factories on Friday - having earlier said it would wait until Monday - as proceedings to start its restructuring plans began.
A judge approved motions allowing Chrysler to continue paying employees, before adjourning until Monday.
The carmaker will next week present plans to reorganise and form an alliance with Italian carmaker Fiat.
But a group representing 20 Chrysler lenders, are set to object to the move into Chapter 11 bankruptcy protection.
This protects firms from their creditors, allowing them to rearrange their finances while still trading.
But the group of lenders which own $1bn (£674m) of Chrysler's $6.9bn debt are unhappy at the terms of a government-brokered deal.
Observers have suggested their objections could delay Chrysler's recovery plan.
Lawyer for Chrysler, Corinne Ball, told the court that the firm could survive bankruptcy - despite many experts thinking this was not possible.
Avoid liquidation
The first bankruptcy hearing, in front of Judge Arthur Gonzalez in New York, dealt with basic issues such as paying workers, cash management, and utility costs.
In front of a packed court house, filled with lawyers and their staff, the judge heard so-called "first-day motions" that will enable Chrysler to continue operating.
Chrysler has said in court documents that the proposed transaction is the only way to avoid liquidation.
But those with an interest in Chrysler's future - including the company, creditors, suppliers, dealers and workers - will seek to have their legal say on the reorganisation plan.
Quick?
The US government has called for a quick, "surgical" bankruptcy, with the process completed within two months. But some experts have said that may be difficult with so many different groups involved, including the group of 20 lenders.
"I can't tell you how many times people say 'quick'," said David Bitterman, managing director of Huron Consulting Group.
"It's never quick. [Car parts-maker] Delphi promised a quick one and they're still in."
Delphi, which was spun off from General Motors, filed for bankruptcy in late 2005.
A White House official said the majority of Chrysler's stakeholders were behind the deal.
"Our judgment is that no judge is going to override that kind of support."
US officials are expected to ask the judge to force the dissenting creditors to accept the same offer that institutions holding 70% of Chrysler's debt have approved.
Investor interests
The carmaker hopes to sell its core assets, including the Chrysler, Jeep and Dodge brands, into a new company that would be owned by the US government, Fiat, and the company's workers.
The group of 20 lenders have said in a joint statement they were being criticised for trying to protect the interests of their investors, including unions, teachers' credit unions, college endowments, and pension and retirement plans.
Tom Lauria, a bankruptcy attorney representing a group of secured lenders, has said Chrysler's proposed plan "inverts" the usual priority scheme, whereby senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders.
Creditors object to the way the restructuring benefits the United Auto Workers union, which is an unsecured creditor, for the $10.6bn Chrysler owes to its retiree healthcare fund.
The lenders said in a statement on Thursday that they had been "systematically precluded" from negotiations with the government.
They said they had not been allocated funds from the Tarp programme, but that Chrysler's four main banks - JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup - had received about $90bn in government bail-out cash.
The four banks, holding 70% of Chrysler's debt, have agreed to a deal that would give them $2bn.
'Painful transition'
University of Michigan professor John Pottow, a specialist in bankruptcy, said the US government's level of involvement was much greater than would normally be found in a corporate bankruptcy.
"If you have the president of the United States who wants something to happen, I think anything's possible in bankruptcy protection," he said.
Meanwhile, Chrysler's suppliers face an uncertain time.
Peter DeLorenzo, of internet car magazine Auto Extremist, told the BBC that "suppliers' backs are already up against the wall".
"It is going to be a very painful transition," he said.
Mr DeLorenzo also said that plans to have the company out of bankruptcy within 60 days were "terribly optimistic".
On Friday, Toshihiro Nikai, Japan's trade minister, said his government would take "solid steps" to mitigate the impact on Japanese car parts suppliers from Chrysler's bankruptcy.
Japan's Denso Corporation sold 43bn yen ($441m) of parts to Chrysler in the last financial year, is owed $18.7m by Chrysler while auto parts firm Yazaki Corporation has $18.3m in unsecured claims.
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