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From: haral@ttidcb.UUCP (Haral Tsitsivas)
Newsgroups: net.legal,net.jobs
Subject: Re: Covering ones behind when a company is folding
Message-ID: <554@ttidcb.UUCP>
Date: Sat, 23-Nov-85 21:08:54 EST
Article-I.D.: ttidcb.554
Posted: Sat Nov 23 21:08:54 1985
Date-Received: Tue, 26-Nov-85 08:27:43 EST
References: <183@pluto.UUCP>
Reply-To: haral@ttidcb.UUCP (Haral Tsitsivas)
Organization: Transaction Technology, Inc. (CitiCorp), Santa Monica
Lines: 42
Keywords: bankrupty, liquidation
Xref: watmath net.legal:2582 net.jobs:1614

In article <183@pluto.UUCP> warren@pluto.UUCP (Warren Burstein) writes:
>I would appreciate suggestions for dealing with a job with
>a company that may soon be dead.  What methods are there for
>extracting back pay?  I have heard that in case of bankruptcy
>creditors get paid before employees.  Is this correct?  
It really depends on how the company folds.  They can declare
Chapter 7 (Liquidation), or they may declare Chapter 11 (Reorganization).
Liquidation involves the termination of the business, distribution
of non-exempt assets, and usually a discharge of all dischargable
debts.  Distribution of assets is as follows (in that order):
1. Secured creditors collect on their security interests.
2. Creditors entitled to a priority receive payment in the order provided.
3. Payment is made to unsecured creditors who filed their claims on time.
4. Payment is made to unsecured creditors who filed their claims tardily.
5. Claims for multiple, exemplary or punitive damages are paid.
6. Interest at the legal rate from the date of the filing of the petition
   is paid on the above claimants.
7. Whatever property remains is distributed to the debtor (probably nothing).

The priority for item 2 above is determined as follows:
a. Bankrupty administrative costs.
b. "gap" creditors (expenses arising in the ordinary cost of business
   after the commencement of the case and before a trustee is appointed).
c. Allowed, unsecured claims up to $2,000 for wages, salaries, or
   commissions earned within 90 days before the filing of the petition
   or the date of cessation of the debtor's business, whichever comes
   first.
d. Allowed, unsecured claims for contributions to employee benefit plans
   arising from services rendered within 180 days before the filing of 
   the petition or the cessation of the business, whichever comes first,
   but limited to $2,000 multiplied by the number of employees covered by
   the plan.
e. Allowed, unsecured claims up to $900 for consumer deposits.
f. Specified taxes owed to governmental units.

NOTE: If any of the above are not satisfied in full, then they become
general unsecured creditors and share equally with the other unsecured
creditors in any remaining assets (i.e. $.30 to $1).

--Haral Tsitsivas
...!{randvax, philabs, vortex, trwrb}!ttidca!haral