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My employer owes me over $25,000. If they file for bankruptcy a second time will they get out of paying me?

Asked almost 3 years ago - Salt Lake City, UT

I haven't been paid in over five months (and when I rarely was it was a partial payment here and there) and I've finally decided to file with the Dept. of Labor. There's at least 100 other employees in the same position so things aren't looking good for the employer. They filed for chapter 7 (I think, the reorganization kind) bankruptcy two years ago, so I guess my question is could they even file for bankruptcy again so soon? And if so would they get out of paying my former coworkers and I all the money they owe? I've heard conflicting answers from the DoL and I just want a straight answer. Thank you so much.

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Christine Ann Wilton

Reputation Level 9

Answered almost 3 years ago. Chapter 13 Bankruptcy Attorney in Lakewood, CA.

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A Chapter 7 bankruptcy is a complete closer and liquidation in a business setting. If you believe the company is restructuring through bankruptcy, then the company has more likely filed a Chapter 11. Be clear on the distinctions for yourself as they each have a different outcome.

If they originally filed a Ch. 11, they can convert it to a Ch. 7 and liquidate if their restructured plan isn't working and the company will inevitably fail. Either way, employee compensation claims will take priority over other debts and depending upon how much money the trustee comes up with (after liquidation), will depend on whether you eventually get paid.

You did the right thing by contacting the Department of Labor. You may also seek to consult with an employment lawyer who can address your legal concerns. I smell a potential class action suit here on behalf of you and all your co-workers.

Best to you.

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