117. My Employer Filed Bankruptcy: Is My Paycheck Protected?

Do you work for a company that has filed for bankruptcy? If so, you may be concerned about what happens next. First, you need to find out is under which chapter your company filed bankruptcy. This will influence you in different ways:

Chapter 7

In a Chapter 7 Bankruptcy, the company will sell off assets to repay creditors. Also, there is a good chance that the company will dissolve. In some cases, some employees remain to help with the liquidation of assets, but will likely be laid off at the completion.

So, what happens to your wages? The court looks at employees that are owed wages, salaries, or commissions as creditors with a high priority. In fact, employees are given a higher priority than other creditors for repayment, with the exception of secured creditors. It should be noted that there is a chance that only a portion of wages will be repaid. And, in some cases, there is not enough funds to provide compensation for wages.

Chapter 11

Typically, a company will use Chapter 11 to remain in business, while seeking assistance to sell off assets and repay creditors through a plan. Generally, employee wages are not affected by the bankruptcy filing. However, the company may lay off a portion of employees to cut costs. Keep in mind, any laid off employees owed wages and/or benefits become creditors in the bankruptcy.

Have More Questions?

If you are unsure about what will happen to your wages or benefits, call us for more information. At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like to get to know you and we would like you to get to know us. We want you to be sure you are the right fit for us and that we are the perfect fit for you. This will allow you to be completely comfortable sharing intimate and difficult details of your case, so we can offer you representation to the fullest extent of the law. Call us today to set up a free consultation.

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Daniela Romero

Daniela Romero has been practicing law in the Los Angeles area since 1998. Ms. Romero has practiced in the areas of civil litigation, family law and bankruptcy law. She was also the staff attorney for the Los Angeles County Bar Association’s Domestic Violence Project. MORE

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