Chrysler Financial, the former captive lender of Chrysler LLC, will liquidate and cease business in Dec. 31, 2011, according to a letter from the U.S. Treasury Department.

Chrysler Financial was replaced by GMAC Financial Services as the preferred lender for Chrysler LLC in April after the automaker filed for bankruptcy. Since then, Chrysler Financial has been in the process of moving its loan business, including floorplan financing, to GMAC.

According to the Treasury Department’s Oct. 22 letter to Chrysler Financial, the lender “is pursuing a successful wind-down of its operations by Dec. 31, 2011, and the repayment of its lenders and investors.”

The future of Chrysler Financial as a business entity remains murky, but the company will continue to service existing loans on Chrysler vehicles, while new loans will be directed to GMAC.

“We remain active and focused on running our operations, including servicing the existing loans and leases of our customers and a portfolio of approximately $26 billon,” Chrysler Financial spokeswoman Amber Gowan said.

The letter sent to Chrysler Financial was among other documents released by the Treasury Department, which ordered the lender and six other companies that received government bailouts to halve total compensation to their top executives.