Bankruptcy – What are the rights of employers?


Bankruptcy is a legal procedure that allows individuals or businesses to free themselves from their debts and offer creditors the possibility of repayment.

Rights of an employee when the employer/company faces bankruptcy

In cases where business owners run out of funds and have filed for bankruptcy, employers may face the loss of their jobs. The employee should know what type of bankruptcy is filed under such circumstances. The type of bankruptcy filed will determine how employees are compensated, what benefits you can still receive, and other requirements you must meet. The assistance of a business lawyer will help them find the best option

Types of bankruptcy

Bankruptcy is handled by federal courts. The business can hire a lawyer to settle bankruptcy issues.

There are different types of bankruptcy, commonly referred to by their chapters. Chapter 7 requires the liquidation of all assets. The business owner sells all his assets to pay off his debts and other credits. Chapter 11 is basically about reorganizing the business. Day-to-day business operations or activities are usually retained with most employees. Additional expenses, excess debt, operating costs, and other expenses are generally reimbursed. The company or business is restructured again.

An employee should know the type of bankruptcy filed by the owner. With a Chapter 7 bankruptcy, the business owner may have so much debt that they must liquidate all assets, which results in the layoff of all workers. With a Chapter 11 bankruptcy, some of the assets or part of the business are liquidated to pay the debts. The main objective is to reorganize and rebuild the business by removing all additional unprofitable expenses, making it profitable again. This requires restructuring the business to remove as many revenue and profit disruptions as possible. If the whole department does not progress or realize the required profits, it can be dissolved or reduced. This translates into the loss of jobs for all or some employees, mostly newer ones.

Even on the verge of bankruptcy, some companies are still hiring new employees, and when they file for bankruptcy, hundreds of workers lose their jobs every year. And when a business doesn’t have enough funds, it can’t collect its salaries and other pending paychecks. If the affected employee is a new worker hired through an agency or union, they can still receive their due income. But new workers who have been hired directly without any association or agency may not receive their payments if there are no funds available.

Legal assistance

In the event of bankruptcy by filing Chapter 7, the employee may not get compensation due to lack of funds, unless the owner opens a new business when the bankruptcy process is complete. Also, owners are required to send 60 days prior to layoffs. Legal assistance from a business lawyer is therefore important. The attorney will guide the employee through the legal technicalities and help them take advantage of the best options for viable compensation claims. “To strengthen your claim and help reevaluate the legal technicalities of whether you as an employee can file a claim against your ex-employer who has filed for bankruptcy, hiring a legal expert is the best approach. “, according to attorney Justin Gillman of the Gillman Bruton Capone Law Group.