Employer Faces Bankruptcy
Businesses may face bankruptcy owing to excessive debts and out of control operational costs. It is important for the employees to know what rights they have if the business fails. Some employers keep this information from their employers as well as hiring agencies, and some hire new employees, without knowing that their company can face bankruptcy later at some stage. Owing to this fact, every year,there are manybusinesses that declare bankruptcy and lay off their employees.
In most cases, the workers who work in those companies remain unable to obtain their salaries or paychecks. Direct hires as compared to the hires through agencies are not guaranteed about their paycheck if the funds are not available.
In case an employee risks to be laid off in the result of the bankruptcy of the company, it is important to know which type of bankruptcy is to be filed. It needs to be considered that if the employee has to be paid yet orstill subject to receive certain benefits.
The most common chapters considered while filing the bankruptcy are Chapter 7 and Chapter 11. In Chapter 7, the liquidation is carried out in which all the assets of the employer are sold swiftly to pay off debts, paychecks, and other creditors. Whereas Chapter 11 concerns the restructuring of the company; the company itself and the standard operations remain the same with the employees. First, the debts and other costs are paid off then the company is reorganized.
Types of Bankruptcy:
In order to file the type of bankruptcy, it is pertinent to consider whether after initial changes, the company will remain or the business will be liquidated.
- Filing bankruptcy with Chapter 7, the company may have to be liquidated if the debts incurred are too high to be paid off with the available funds; this also includes laying off the employees and workers. In case the owner remains unable to recover from the bankruptcy by establishing a small business, this will result in severing relationships and losing customers.
- Filing with the Chapter 11 bankruptcy, it holds that the company can survive the financial distress. There is no liquidation, and the entire company is simply reorganized to remove the liabilities. For example, if a certain department is not generating any revenue, it may be shut down with all the workers. Or the new workers may become jobless. The excess credits are paid through limiting or lowering the transactional or operating costs.
In the case of Chapter 7 bankruptcy, the employee stands jobless. In case there are no funds to pay the employees, seeking compensation remains near to impossible until the owner begins a new business. In order to seek available options, hiring legal services of an attorney is very important. The skilled business attorney can give valuable advice to the employee about how he or she can be compensated. There is one thing to keep in mind that employees who receive wages and pensions are on the priority for the compensation. If you are employed in Chicago, you must seek legal help from a Chicago bankruptcy attorney. While hiring an attorney, remember that the rights of employees depend upon the type of the bankruptcy filed.
In certain cases, the employer is supposed to give a notice period of 60 days for the layoffs. However, funds may be available for the wage employees under Chapter 11, are still subject to be paid if the employees work on a daily basis. If the company lays off employees, they become creditors and it can become necessary to seek help from an attorney to recover the money or wages and even file litigation.
If you, your friend or any of your relative has lost a job due to bankruptcy, this is the right time to hire a bankruptcy attorney and seek professional advice.