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Will your employees’ wages be paid in a Chapter 7 business bankruptcy?

| May 4, 2021 | Chapter 11 |

One of the worst things about a business bankruptcy is letting down your employees, some of whom may have been with you since its inception. But reality must be dealt with, and the answer to that question is that they likely will not receive the wages they are owed once the business bankruptcy is filed under Chapter 7.

They could possibly be paid something farther down the line as your employees-turned-creditors, but this is never a given in a Chapter 7 bankruptcy.

What you could do

If you have not already, speak to a business bankruptcy attorney about possibly filing under Chapter 11. This is preferable for many reasons, not the least of which is that it allows your doors to remain open and income to be generated that will allow you to pay at least some employees.

However, even filing under Chapter 11 can mean a great bit of fat-trimming, and almost inevitably leads to some personnel layoffs. While you may be genuinely distressed at this option, by giving them a pink slip, you allow them to file for unemployment while seeking another job elsewhere.

What you can’t do

Prioritizing paying your employees in bankruptcy proceedings can only lead you into trouble with your bankruptcy trustee and could forfeit your chance for a discharge of your business debts. That is an outcome you certainly never want to face.

Seek guidance during every phase of the bankruptcy process

Regardless of the course that your bankruptcy takes, you are likely to have questions. Your attorney can answer them and help you stay on a steadfast path to financial freedom.