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, we 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.

HERE ARE SOME OTHER ARTICLES YOU MAY FIND WORTHWHILE:

Misclassification of Employees as Independent Contractors - What's That Mean? Pennsylvania Contingent Fee Lawyers Explain

Can 1099 Workers Get Overtime? What Can I Do if I Have Been Misidentified as an Independent Contractor (Paid on a 1099) When I Should be Deemed to be an Employee (w-2 Worker?)  Pennsylvania Employment Lawyers Explain

Am I Really a Self-Employed Independent Contractor?  How Do I Know if I am Self-Employed or Properly Identified as a 1099 Employee??

Comparing Pennsylvania's State Overtime Law, the Minimum Wage Act, with its Federal Counterpart, the Fair Labor Standards Act - Pennsylvania Wage and Hour Lawyers

Do I Have to Be Employed to Get the Bonus or Commission I Earned in Pennsylvania?

Are You Owed Money by Your Former Employer?  Pennsylvania's Wage Payment and Collection Law is a Powerful Statute

Two Important Differences in Pennsylvania Law for Overtime Claims - Sales Persons and IT Professionals

 Overtime Rules, Regulations and Laws in Pennsylvania

If You are a Computer Professional, You Are Entitled to Overtime in Pennsylvania

Overtime for Sales Persons in Pennsylvania - Exempt or Non-Exempt? Outside Sales Persons Entitled to Overtime in Pennsylvania

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Philadelphia Area Wage and Hour Attorney Helping Employees Collect Wages, Compensation, Bonuses and Severance on a Contingent Fee Basis Attorney Representing Employees

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