Thompson Law Group, P.C.

How employees are impacted by a Chapter 11 bankruptcy


When companies in Pennsylvania and elsewhere are dealing with business debt, the process often overwhelms business owners. While this is a natural response to an often serious and major business move, it is important to note that it does not only impact those in charge. Filing for bankruptcy could impact each and every individual working at the company. Thus, it is important that everyone is informed of their rights and how the process could affect them.

Chapter 11 can provide many opportunities for businesses, such as reorganization, debt elimination and debt restructuring; however, these benefits can strike fear into the employees as soon as they hear that their employer is initiating the process. Their major concern is whether or not they will continue to have a job, and if they do, what that job will look like.

While some companies file for Chapter 11 to reorganize its debts, and provide a way to protect the business, its assets and employees while new terms are negotiated with creditors, other businesses file for Chapter 11 to liquidate debt. For some, it is a mechanism to position the company so that it can be sold, can sell assets or liquidate the company. Because it can go either way, many employees are concerned about the longevity of the company and their career.

The good news is that when a business files for Chapter 11, this usually means that they intend to continue doing business. This may mean reorganization and restructuring, which could affect employees and other elements of a business.

Filing for business bankruptcy impacts all facets of the company. Whether you are the employer or employee, it is important to understand the process and how it could impact you. Additionally, it important to understand what steps you can take to protect your rights.

Source: Thebalance.com, "What to Do When Your Company Files Chapter 11 Bankruptcy," Carron Armstrong, April 28, 2017

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