Can an employer include what he owes his employees in payroll in bankruptcy?

UPDATED: Jul 29, 2011

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Can an employer include what he owes his employees in payroll in bankruptcy?

My last 2 checks ($1800) bounced. I heard he is filing for bankruptcy.

Asked on July 29, 2011 Colorado


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

I assume since this is the second check that has bounced, you have already spoken to your employer about this. If not do so ASAP. If a bankruptcy is filed you won't be able to get a replacement check. Instead, in that event, you will become a creditor of the company. Your unpaid wage, vacation pay and/or like claims will rank as "preferred" claims in a bankruptcy proceeding (behind "secured" creditors but ahead of ordinary creditors). 

Once you have official notice of the bankruptcy filing (and as a creditor you will get one) you will need to file a wage claim. There will be a meeting of creditors (although you do not need to attend).  Employees who are owed wages will share in the remaining assets of their bankrupt employer.  In some cases, there will be sufficient assets to satisfy employee claims in full; in others, employees may be compensated for only a portion of their claims; or in still other cases they will receive nothing at all.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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