UPDATE 1-Judge denies bid to move GM appeal to higher court

* Judge denies bid to go straight to federal appeals court

* Judge denies asbestos' claimants bid to stay sale (Adds judge's ruling, dateline, bylines)

By Emily Chasan and Phil Wahba

NEW YORK, July 7 (Reuters) - A U.S. bankruptcy judge refused on Tuesday to allow a group of individuals claiming to have been harmed by General Motors Corp GMGMQ.PK vehicles to appeal directly to a U.S. federal appeals court against the sale of the automaker's assets.

Judge Robert Gerber of federal bankruptcy court in Manhattan also rejected a request by a group of asbestos claimants to stay the sale of GM to a group led by the U.S. Treasury.

Judge Gerber did not explain his ruling but said he would issue a written decision and his reasoning by the end of the day Tuesday.

Late on Sunday, Judge Gerber approved GM's plan to sell its most profitable assets to a "New GM" funded by the U.S. government. [ID:nN06331880]

Normally, appeals of bankruptcy court decisions are made in the district court, but due to the speed sought in the case, the accident victims had sought to skip that step.

A lawyer for the accident victims, Steven Jakubowski of Coleman Law Firm, told the court on Tuesday evening by telephone that if the GM sale goes ahead, it would be practically pointless for the victims to seek redress.

"They would be litigating for 10 cents on the dollar," he said.

But GM's attorney, Harvey Miller of Weil Gotshal & Manges, also speaking by telephone, said that if the GM sale were blocked or delayed, there would be nothing left at all for claimants to try to recover.

The U.S. government had set a deadline of July 10 for the transaction to be approved, after which it would no longer fund GM.

"If it doesn't close, there is no alterative, so a group of tort and asbestos claimants are prepared to see these assets go down in flames," Miller said.

The consumer group, along with the asbestos claimants, had sought to overturn Judge Gerber's decision, because the "New GM" is being created from assets sold "free and clear" of such claims and they would be unable to sue. If the sale goes ahead, the injured individuals will likely have to seek recourse from the "Old GM" left in bankruptcy court, where they will not be able to recover much.

The asbestos claimants had also filed court papers seeking a stay of the sale that would delay it from taking effect until after the results of the appeal.

In his opinion approving the sale, Judge Gerber had written that the liability objection was the only "truly debatable" issue he had heard in the GM case, but ultimately agreed with GM that it was necessary to allow the company to leave such claims behind.