If a company files for bankruptcy does an employees salary come before other creditors?
Tags:doors, filing for bankruptcy, food chain,
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My father functions freelance for the association which is carrying monetary problems, he hasn’t been paid given October. Now they have been shuting the doors as well as we do not know if they have been filing for failure (or protection). But where does an worker come in upon the food chain? Will the association which has leased equiptment to this commercial operation be paid prior to my husband? Please any answers will be really most appreciated. Thank you.
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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.
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.
The Judge will make the determination