If your company’s been struggling to meet the bills, your employees may not be terribly surprised by the news that you’ve filed for bankruptcy protection — but they will have questions.
Here’s how to handle your employees’ questions about the future:
What does bankruptcy mean for the company?
If you’re filing Chapter 7, your company’s assets will be liquidated, and your business will most likely be closed at some future point. If you’re filing Chapter 11, there’s every possibility that your company will emerge from the ashes of your debts stronger than ever before.
Be honest with your employees if you know which version of bankruptcy you intend to file — and if you don’t. Try to keep the lines of communication open so that you don’t have the rumor mill going wild and panicked reactions from your staff. If lay-offs are a possibility, there’s likely nothing to be gained by hiding that fact.
What happens if an employee is still due wages or benefits?
Some of your employees may have built up considerable equity through unused vacation time or retirement plan contributions. Others may be owed significant back wages or overtime pay that’s been delayed.
Typically, once your company files bankruptcy, the trustee in charge of your case will prioritize your creditors’ claims. Fortunately for your employees, their wage and benefit claims are generally considered “priority” unsecured debts. That means that they’ll typically be high on the list to be paid. You may need to provide your employees with the trustee’s information so that they can get more information.
If it’s time to consider Chapter 7 or Chapter 11 bankruptcy for your business, find out the legal steps you should take next.