Friday, March 4, 2011

Payment of Employee Wages In Bankruptcy Cases

How Can I Collect Employee Wages, Compensation, Benefits and Severance Pay From My Employer That Went or is Going Bankrupt?  What is the Difference Between Pre-Petition Debts and Post-Petition Debts?

Recently, I published a Post on the rules relating to paying Severance to Executives of bankrupt companies.   

Not Easy to Collect $200, but Not Impossible, Either
Now let's talk about wages due and owing to any regular employees of a employer that files for bankruptcy.

There are two types of wages that are at issue in bankruptcy cases: 1) pre-petition wages; 2) post-petition wages.

Pre-Petition Wages Due By Bankrupt Companies

These are wages and compensation that became due (and were unpaid) prior to the date that the bankruptcy petition was filed.  This would include regular wages, severance pay, the value of unpaid benefits, accrued vacation and the like. 

If Severance Was Owed Before Bankruptcy Filed,
 May Pass Go and Collect $11,725
Post-Petition Wages Due By Bankrupt Companies

These are wages and compensation that become due after the date of the bankruptcy.  This would also include regular wages, severance pay, the value of unpaid benefits, accrued vacation and the like.

Do I Have to Still Be Employed in Order to Collect Unpaid Wages, Compensation, Bonuses or Severance From My Old Employer That Filed for Chapter 11 Bankruptcy?  How Are Pre-Petition Wages Paid in Bankruptcies?

In fact, I am of the view that in many cases it is better to be an ex-employee owed wages than it is to be a current employee owed wages!  That is because, while the claims of former employees are typically paid just like those of any other unsecured creditors - the first $11,725 of unpaid compensation is treated as a priority claim, thus giving you a leg up on most other creditors.  See 11 U.S.C Section 507(a)(4).  If you fall into this category, make sure you check off the appropriate priority box when you complete your Proof of Claim.

While employees who are still employed as of the date of the bankruptcy (and thereafter) are entitled to the same priority claim, many employers will file a motion with the bankruptcy court seeking permission to bring their obligations to such employees up to date at some future, undefined date prior to when the reorganization is completed. 

How Are Post-Petition Wages Paid in Bankruptcies?

For employees who remain employees after the bankruptcy filing, wages earned, and thus first owed, after the filing of the petition are usually deemed Administrative Expenses, and typically the Bankruptcy Judge will permit the bankrupt company to pay those wages on an ongoing basis while the reorganization is being planned. See  11 U.S.C. Section 503(b)(1)(A). 

Bankruptcy law is very complicated, and you should not by any means treat this post as legal advice!  Rather, if you have a claim for wages against a bankrupt company, you should seek out legal advice from a qualified attorney.

Helping Pennsylvania's Workforce Since 1991
Philadelphia Area Wage and Hour Attorney Helping Employees Collect Wages, Compensation, Bonuses and Severance on a Contingent Fee Basis Attorney Representing Employees

John A. Gallagher is an employment lawyer who represents claimants in Pennsylvania. 

John typically represents workers who need an employment lawyer throughout Southeastern Pennsylvania, including those working in Philadelphia County, Delaware County, Montgomery County, Bucks County, Chester County, Berks County and Lancaster County.

Pennsylvania Wage and Hour Lawyer Provides Free Telephone Consultations and Contingent Fee Representation

If you are owed money by your employer, are looking for a contingent fee lawyer who is experienced in collecting wages, compensation, bonuses and severance from corporations that withhold payment from their employees and or work in East Norriton, East Nottingham, East Vincent, Easton, East Whiteland, Edgemont,  Elkins  Park,  Elverson,  Essington, Exton,  Fairless Hills, Feasterville Trevose, Fleetwood, Flourtown,  Folcroft,  Folsom, Fort Washington,  Franconia, Gap, Gilbertsville, Gladwyne,  Glen Mills,   Glenolden,  Glenside, Green Lane, Gwynedd,  Gwynedd Valley, Hanover, Harleysville, Hatboro,  Hatfield, Haverford,  Havertown, Honey Brook,  Horsham, Huntingdon Valley, Immaculata,  Jenkintown, Kennett Square,  Kimberton,  King Of Prussia, Kutztown, Lafayette Hill,  Lancaster,  Langhorne,  Lansdale,  Lansdowne, Lawrence Park, Levittown, Limekiln, Limerick, Lionville, Lititz, Londonberry, Lower Merion and Lower Moreland or any surrounding areas, feel free to send me an e-mail or give me a call.  I am always glad to spend some time with people via a free telephone consultation.

Need an Experienced Contingent Fee Lawyer to Collect Money You Are Owed by Your Former Employer?

Click Here if you have questions about any aspect of employment law, from wrongful termination, to wage and overtime claims, to discrimination and retaliation laws, to Family and Medical Leave

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