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Bankruptcy can deeply affect a person’s finances and financial future. An individual should know how it could affect the finances, assets and incomes, etc., before filing for bankruptcy. Without knowing how it might affect the wages, the individual might make wrong decisions. This article provides answers to some of the most commonly asked questions about issues related to this. How long should an individual work to show employment / wages before filing for bankruptcy?
Usually there is no time limit for an individual to get a salary before filing. Are unpaid wages considered as secured debt in a bankruptcy?
It is not usually considered secured debt even where the employee has a written contract guaranteeing him / her the salary. However, it might be accorded a priority status. When a company files for chapter 11 bankruptcy, would a judge pay the salaries of the employees before or after the filing date?
In such a case the court usually handles the pre and post bankruptcy petition salaries in a different manner. The salary which is due to be paid post bankruptcy petition, is usually accorded priority and paid before the pre bankruptcy petition is settled. In some cases the latter might also be given priority but may be paid only after the payments are settled of the post bankruptcy petitioners. Where should the accrued wages be mentioned on a schedule B of a bankruptcy petition?
An individual might mention the accrued and unpaid wages under point 18 of schedule B under “other liquidated debts owed to debtor including tax refunds”. Can someone be forced to work without pay if a company files for chapter 11 bankruptcy?
Nobody can be forced to work without pay even if the company has filed for chapter 11. It might be construed as involuntary servitude. Can someone file for a chapter 7 bankruptcy if his / her wages are more than the salary requirements of a chapter 7 bankruptcy?
It is not possible for an individual to file a chapter 7 under such circumstances. There is no exception to this rule. However, the individual might opt for a chapter 13 bankruptcy and work out a repayment plan. Can the head of a household’s wages be garnished for debt collection?
Wage garnishment laws are not uniform throughout the U.S. They vary from state to state. For example, in Florida, the head of a household’s debt is exempt from any kind of creditor claims. But, if the wages are above $500 a week, then it can be garnished if the debtor gives a written consent. Knowing about the effects of bankruptcy on wages helps individuals understand whether filing for bankruptcy might affect all of their wages or not. Detailed information about this helps individuals to assess their standing and decide what they ought to do in case the company files for a bankruptcy. However, it is a complex matter and in case you are not sure about your or your employer’s bankruptcy on your income, it is better to ask a bankruptcy lawyer to advise the best course of action.
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