Given the economic challenges of late, many business owners may consider Chapter 11 bankruptcy protection in order to turn things around financially, restructuring debt and the overall organization of the business so that they can remain open. Soon as they file a petition for bankruptcy, an automatic stay is triggered, providing some needed breathing room from creditor actions while they figure things out.
Of course, when a business owner declares Chapter 11 bankruptcy, there are many questions that arise. Can a business owner retain prized employees while cutting others on their staff in a bankruptcy? Is the owner permitted to make wage payments and offer health insurance benefits to their employees under bankruptcy? Can a company in Chapter 11 enter into executive agreements? Are severance payments payable prior to declaring bankruptcy and are businesses in bankruptcy liable to pay severance for existing agreements? What about non-compete agreements – can an employee enforce non- competes while they are in bankruptcy?
Chapter 11 bankruptcy protection raises many questions regarding human resources and it is important for a business owner to work with an experienced attorney to ensure they are in compliance with the law. Typically an owner in possession is entitled to conduct ordinary operations regarding their employees after filing for bankruptcy, but it is best practice to work closely with an experienced bankruptcy attorney who can seek court approval when necessary, especially if HR actions are atypical, and ensure that a business owner is not violating both federal and state laws.
The business bankruptcy process can be complex. We will review your assets, income, expenses and debt to determine if Chapter 11 bankruptcy is the right solution for your business. We are here to answer your bankruptcy questions, contact Peoria bankruptcy attorney Charles E. Covey for immediate assistance at 309-674-8125.