When a business goes bankrupt it, it isn’t the management and owner who tends to get hit the hardest. Instead, it is the on the ground workers who are more likely to feel the hit the hardest.
Higher paid employees like management who would know more about the bankruptcy likely have enough money saved up that they can get by. For entry-level employees and those not in management, however, chances are they won’t be as well off.
If you fall into this category and your business is going bankrupt, it can be a scary time. You are likely wondering what will happen to you. Will you still have a job? Are the bills going to pile up and will you have to file for bankruptcy yourself?
We want to provide you with the best bankruptcy help in Scottsdale. So, if your company is going bankrupt, as an employee, here is what you should know.
It depends on the Type of Bankruptcy
There are two types of bankruptcy claims that a business can go through. Depending on which one is being processed, will determine what happens to you as the employee.
If your company is filing for Chapter 11, the business is asking help from the courts to repay creditors and sell off assets. There is a chance you could get laid off as they go through cost-cutting measures. On the other side, the employer may retain all positions, but written employment contracts may be up for renegotiation that could not end well in your favor.
If your company is filing for Chapter 7 though, this is the liquidation of the entire business, meaning the company’s existence comes to an end. Most likely all employees will be out of a job after the end of the liquidation and the bankruptcy concludes.
Unpaid Wages Will Get Paid Out
If you get laid off due to the bankruptcy liquidation, any wages you’ve earned that has not been paid will be treated as a debt owed from the employer. There is a cap for wages, and salary earned up to 180 days before bankruptcy.
You cannot guarantee payment, however. In the Fair Labor Standards Act, unpaid wages are not covered. This means if there are not enough assets to pay for all of the unpaid wages, you may not receive anything at all.
You May Lose Your Pension
Most likely your employee pension plan will get terminated in the event of a liquidation. There was, though, the Pension Benefit Guaranty Corporation (PBGC) put in place to protect private sector workers. So, if your employer cannot pay your benefits, the PBGC will help out to fill the gap in pension assets.
If you have accrued vacation days, they will fall into unpaid wages. This means you are likely to get compensated for them. However, once again, you cannot guarantee that you will receive your payout. The labor laws differ from state to state.
These are a few of the things to look out for if your company is filing for bankruptcy. If handled well, you could still be compensated for any unpaid wages, pensions, benefits, and vacation days after discharge. However, there is always the risk that you will receive nothing if the company cannot come up with enough money to pay their debts and your owed wages.