My employer filed for bankruptcy. Will I continue to be paid?

Get Legal Help Today

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Jul 16, 2021

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

There are a few different parts to this question. First, if your employer files a Chapter 11 bankruptcy, continues to operate, and does not terminate you, you should be paid for work you do during the Chapter 11. Second, if the employer files a Chapter 7 bankruptcy or converts a Chapter 11 to a Chapter 7, wages you are owed are given a priority under bankruptcy law. If you earned wages after the filing, as you would if the bankruptcy was a Chapter 11, your wages are given a very high priority because they are treated as “administrative expenses,” which are costs related to keeping the debtor operating or preserving its assets.

Wages earned before the filing get a lower priority, but are still paid before general unsecured claims. At least some of the wages (currently $10,950) you earned up to 180 days before the filing are given this priority. Wages in this context include “wages, salaries, or commissions, including vacation, severance, and sick leave pay.” But that assumes that there are assets available to pay your claim. In many cases, the employer may not have many assets left. If that’s the case, you might get a few pennies for each dollar you are owed, or you might get nothing at all. The first thing to do is to file a proof of claim form, available from the clerk of the bankruptcy court as soon as possible. If you don’t file a proof of claim on time, you might lose any right to collect for unpaid wages.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption