{"id":198,"date":"2012-07-17T18:53:36","date_gmt":"2012-07-17T18:53:36","guid":{"rendered":"http:\/\/www.fremont-bankruptcy-attorney.com\/blog\/?p=198"},"modified":"2021-05-04T22:34:41","modified_gmt":"2021-05-04T22:34:41","slug":"what-happens-to-wages-i-owe-my-employees-when-i-file-bankruptcy","status":"publish","type":"post","link":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/2012\/what-happens-to-wages-i-owe-my-employees-when-i-file-bankruptcy\/","title":{"rendered":"What Happens to Wages I Owe My Employees When I File Bankruptcy?"},"content":{"rendered":"

By Ryan C. Wood<\/a><\/p>\n

In this economy many big corporations are struggling so it is not difficult to imagine that a lot of the small business owners are struggling as well.\u00a0 Numerous business owners rely heavily on credit to ensure their daily business activities run smoothly.\u00a0 What happens when the credit dries up and business is slow?\u00a0 Some of these business owners make the financial decision to file for bankruptcy protection. \u00a0So what happens if you are a business owner that has decided to file for personal bankruptcy protection under Chapter 7 or Chapter 13 of the Bankruptcy Code but you still owe wages to your employees?<\/p>\n

Wages owed to employees are considered a priority debt when you file for bankruptcy<\/a>.\u00a0 What does this mean? It means that not all creditors are equal.\u00a0 Certain creditors have priority and would get paid first before other creditors.\u00a0 It all depends on how much money is available to creditors.\u00a0 The creditors would need to file a proof of claim first with the bankruptcy court in order to be paid.\u00a0 It does not matter if the creditor is the first one in line and would be entitled to receive all the available funds if the creditor does not file a proof of claim.\u00a0 The will not be paid if no proof of claim is filed.<\/p>\n

If you file a Chapter 7 bankruptcy<\/a> case, any assets that are not protected or exempted will be liquidated to pay your creditors.\u00a0 If you file a Chapter 13 bankruptcy case, creditors get paid through the availability of funds in the Chapter 13 plan.\u00a0 The Chapter 13 Trustee would pay the creditors based on the priority of the debt.<\/p>\n

Wages, salaries, or commissions, including vacation, severance and sick leave owed to employees are considered very important and therefore have a higher priority than most creditors.\u00a0 The caveat is that there is a limit on the priority amount.\u00a0 Pursuant to 11 U.S.C. \u00a7507(a)(4), the priority amount is limited to $10,000 for each individual or corporation that is earned within 180 days before you file your bankruptcy petition or before your business ended, whichever occurred first.\u00a0 Any additional amounts owed after the $10,000 are treated the same as a general unsecured creditor.\u00a0\u00a0 For example: you owe $15,000 in wages to a former employee.\u00a0 $10,000 would be considered priority debt.\u00a0 The former employee would get this $10,000 before any other creditors.\u00a0 The former employee would be paid the remaining $5,000 at the same percentage as all other general unsecured creditors.\u00a0 The percentage could range from 0% to 100%.\u00a0 It depends on the availability of funds in the bankruptcy case.\u00a0\u00a0 If the debt is earned more than 180 days prior to the filing of the bankruptcy case, then the entire $15,000 is considered a general unsecured creditor and the debt would not be considered a priority debt.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Ryan C. Wood In this economy many big corporations are struggling so it is not difficult to imagine that a lot of the small business owners are struggling as well.\u00a0 Numerous business owners rely heavily on credit to ensure their daily business activities run smoothly.\u00a0 What happens when the credit dries up and business […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[40],"tags":[],"_links":{"self":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/198"}],"collection":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/comments?post=198"}],"version-history":[{"count":6,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/198\/revisions"}],"predecessor-version":[{"id":1168,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/198\/revisions\/1168"}],"wp:attachment":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/media?parent=198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/categories?post=198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/tags?post=198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}