Home Sponsored Content Bankruptcy – What are the employers’ rights?

Bankruptcy – What are the employers’ rights?



Bankruptcy is a legal process that allows individuals or businesses to get freedom from their debts and provide creditors with an opportunity for repayment.

Rights of an employee when employer/business is facing bankruptcy

In cases where owners of a business run out of funds and have filed bankruptcy, the employers may be facing the loss of their jobs. The employee needs to know which type of bankruptcy is being filed in such circumstances. The kind of bankruptcy filed will determine how employees are to be paid, any benefits that you can still receive, and other requirements that need to be met. A business lawyer’s assistance will help them achieve the best option

Types of bankruptcy

Bankruptcy is handled in federal courts. The company may hire an attorney to sort matters regarding bankruptcy.

There are various types of bankruptcy, commonly referred to by their chapters. Chapter 7 requires liquidation of all assets. The business owner sells all assets to pay off debts and other credits. Chapter 11 is basically to reorganize the company. The company’s standard operations or business are usually retained along with most employees. The extra expenses, excess debts, operation costs, and other expenditures are generally paid off. The company or business is again restructured.

An employee needs to know the type of bankruptcy filed by the owner. With a chapter 7 bankruptcy, the business owner may have so many debts that they have to liquidate all assets, resulting in laying off all workers. With a chapter 11 bankruptcy, some of the assets or part of the business are liquidated to pay the debts. The main goal is to reorganize and reconstruct the business by removing all the extra non-profitable expenditures, making it profitable again. This needs to restructure the company to remove as many ruptures of income and profits as possible. If the entire department is not making any progress or not making the required profits, it may be dissolved or downsized. This results in loss of jobs of all or some mostly newest employees.

Even on the verge of bankruptcy, some companies still hire new employees, and when they file bankruptcy, hundreds of workers lose their job each year. And when a company does not have enough funds, they cannot get their salaries and other pending paychecks. If the affected employee is a new worker hired through an agency or union, they may still receive their due income. But the new workers that were directly hired without any association or agency are likely not to receive their payments if there are no funds available.

Legal assistance

In case of bankruptcy through chapter7 filing, the employee may not get the compensation because of the lack of funds unless the owner opens a new company when the bankruptcy process is over. Also, the owners are bound to send 60 days before the layoffs. Therefore legal assistance from a business lawyer is significant. The lawyer will guide the employee through legal technicalities and help them in availing the best options for viable compensation claims. “To make your claim stronger and help reevaluate the legal technicalities of whether you as an employee can put out a claim against your ex-employer who filed for bankruptcy, hiring a legal expert is the best approach,” according to Attoreny Justin Gillman of the Gillman Bruton Capone Law Group.


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