Chapter 11 Bankruptcy: What Happens When You File This Type Of Bankruptcy?
Filing a Chapter 11 Bankruptcy is a serious action for any company to take. And guess what? It might strike terror in the hearts of employers, creditors, and even vendors. Further, it may have severe consequences for the workforce. But of course, it doesn’t have to be necessarily doomed.
Definition of Chapter 11 Bankruptcy
This type of bankruptcy allows the reorganization of business affairs, assets, and debts. If businesses require time to restructure their debt, they usually file for Chapter 11 Bankruptcy.
Maybe in some news, you have heard of big companies filing for bankruptcy, and that they specifically file Chapter 11 Bankruptcy. However, it’s only those big companies tend to file such type of bankruptcy. Also those small businesses and sometimes even individuals files such type if needed.
Persons or companies that file for Chapter 11 Bankruptcy are referred to as Chapter 11 debtors. Filing such bankruptcy helps the business and the company’s asset be protected while they negotiate for new terms in settling with their debt. Further, it’s also a better way to position the company to be sold, sell assets or even to conduct an orderly liquidation.
It could be understood that the workforce of an organization might be nervous once the company has filed chapter 11 bankruptcy. They may worry on the possible numerous layoffs, purges, and merges. When it comes to the employee’s rights, differ depending on the company.
What happens to the employee’s wages and benefits?
When a company files for a Chapter 11 Bankruptcy, it intends to continue the business while it negotiates for restructuring of the company’s finances especially in settling its debt. Because they may have seek protection from bankruptcy court, every action of the company has to be approved by bankruptcy judge. Moreover, creditors will have to seek approval on from the court whenever they will take action against the debtor or the company.
Now, because the company is under negotiation in paying its debt while continuing to operate the business, the income of the company is expected to be lowered than before. However, they have to include in the expenses the employee’s wages, health insurance and other benefits required by the law.
Companies conducting layoffs and job actions must still adhere to the federal and state statutes and regulations. The company must terminate employees in accordance to the state’s law.
Chapter 11 Bankruptcy is definitely a great bankruptcy type to all organizations and companies. Despite undesirable situation of the company, they still have the chance to restructure the company and eventually rise from whatever loses they may experience. Want to know more about bankruptcy? Visit www.410law.com to know more about it.