Companies sometimes have financial troubles that start to affect their ability to remain operational. In some cases, the company may realize that they have to file bankruptcy. There are different forms that they can file, one of which is a Chapter 7 bankruptcy.
When a company files this type of bankruptcy, the company’s assets are liquidated to pay creditors. During this process, employees are considered creditors, but they have a higher priority than some other creditors.
Specific limits apply
Employees can claim unpaid wages in certain amounts that apply to the 180 days prior to the employer filing bankruptcy. It’s sometimes possible for employees to seek certain benefits. These can include contributions to health benefits or retirement plans, but the same time limit applies to these.
If the company’s assets aren’t enough to cover worker claims, they may not receive all they’re due. At that point, there isn’t anything the workers can do to receive those funds. Because of this, it might be best for workers to avoid counting on any funds from the bankruptcy until they receive them.
While employees are given special consideration when a company files for a Chapter 7 bankruptcy, there isn’t a guarantee that it will happen. This depends primarily on the company’s assets. This is an important consideration in a business bankruptcy, but it’s not one that should shape the entire decision about filing. Any business owner who’s considering a bankruptcy should ensure they have someone on their side who can help them to understand their options.