What Happens If Your Employer Declares Bankruptcy?
If you’ve purchased a home with a mortgage or an automobile with a car loan, you know you’re a debtor. But did you know that you’re probably a creditor, too? If you keep money in a bank, own a retirement account, or simply have a job, you’re a creditor.
Just like your lenders are concerned about your ability and willingness to make payments on your home loan and car note, you should probably be mindful of the creditor risks you face, too. Do you know what would happen if your employer files for bankruptcy?
Most employees don’t think of themselves as creditors of their employer, but that’s what they are. Salaries, stock options, retirement accounts and pensions, and health insurance benefits are all promises that a firm is obliged to honor. In the case of bankruptcy, these valuable promises due to you may be put into jeopardy. You’ll need to take action.
First, in most situations, you’ll need to file a proof of claim listing the obligations your debtor-employer owes you. A proof of claim gives the debtor, the bankruptcy court, and other creditors notice that you expect to be paid.
Second, you may need to move quickly. Employees who sit on their rights may lose their benefits. Failing to file a proof of claim within the statutorily prescribed time frame may put your rights at jeopardy.
Finally, you may need to fight for your rights. Depending on the financial state of the firm, other creditors may have more highly prioritized claims than yours. If this is the case in your employer’s bankruptcy, you may face the prospect of a court-imposed discount, also known as a haircut, which may include lost compensation.
Do you need to know more about your rights as a creditor? Find out how the bankruptcy professionals can help you protect against your creditor risks by contacting our attorneys today. With years of experience, we know what questions to ask and what actions to take.