If a company files for bankruptcy does an employees salary come before other creditors?
My husband works freelance for a company that is having financial problems, he hasn’t been paid since October. Now they are shuting the doors and we don’t know if they are filing for bankruptcy (or protection). But where does an employee come in on the food chain? Will a company that has leased equiptment to this business be paid before my husband? Please any answers will be very much appreciated. Thank you.
Your letter claims he was a "freelance" worker. That implies he was working as a contractor, not an employee in legal terms.
Therefore, he falls in with the other creditors.
Depending on the type of bankruptcy, he may get some money. First in line are "priority" debts like taxes and government loans. "Secured" loans are next, for mortgages or any loan that has a property lien attached.
Whatever is left over gets divided between all of the other creditors.
Remember this is a vague answer because all of the states have differant rules. Businesses will fall under differant rules. And the new bankruptcy law that took effect last year makes it worse to predict what will happen to your husband’s money.
Good luck.
This entry was posted on Friday, July 3rd, 2009 at 4:03 am and is filed under bankruptcy protection. Follow the comments through the RSS 2.0 feed. You can post a comment, or leave a trackback.
NOrmally the employess do get paid, but in many cases not the full amount. They work out some ratio for payments to everyone. The secured creditors get their amt from the assets they have secured, unsecured crs come next and the shareholders are the last to get the amount if any is left.
Normally some formula is worked out and some proportion is fixed for each set of persons to whom the company owes.
References :
July 3rd, 2009 at 9:39 am
Your letter claims he was a "freelance" worker. That implies he was working as a contractor, not an employee in legal terms.
Therefore, he falls in with the other creditors.
Depending on the type of bankruptcy, he may get some money. First in line are "priority" debts like taxes and government loans. "Secured" loans are next, for mortgages or any loan that has a property lien attached.
Whatever is left over gets divided between all of the other creditors.
Remember this is a vague answer because all of the states have differant rules. Businesses will fall under differant rules. And the new bankruptcy law that took effect last year makes it worse to predict what will happen to your husband’s money.
Good luck.
References :
July 3rd, 2009 at 10:27 am
The Judge will make the determination
References :
July 3rd, 2009 at 11:17 am