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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 39009
Experience:  Retired (mostly)
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Thank you. We are considering filing chp. 7 bankruptcy. We

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Thank you. We are considering filing chp. 7 bankruptcy. We are an S Corp and several clients defaulted on their invoices last year. Additionally, the industry we are in, is not profitable enough or viable enough to maintain a descent business in. As a result, we had to lay off our employees. We owe quite a bit of back salaries to our former employees. Will this option let us settle for a percentage of the back pay or completely write this off?
Submitted: 7 years ago.
Category: Business Law
Expert:  socrateaser replied 7 years ago.

Unless you are found to have willfully intended to not pay the wages, which would be a misdemeanor, you can avoid any personal liability for the unpaid wages via bankruptcy.of the corporation. See e.g., Reynolds v Bement (2005) 36 C4th 1075.


Hope this helps.


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Customer: replied 7 years ago.
Thank you for this answer. I looked up the Reynolds case you cited but wasn't able to find much through Google. I wasn't clear on the takeaway from that case after reading the info. I found on it. See

We did not "willfully" withhold the wages. There simply isn't much money or promise of future income. Would you please clarify the point around the company's liablilty. To clarify, what I am asking is "If we file a Chapter 7 bankruptcy for the company, would the company still be liable for the full unpaid wages?" Many thanks!
Expert:  socrateaser replied 7 years ago.
The question you are asking is a non sequitur. If you are filing Chapter 7, then you are folding the tent entirely. The assets will be paid out against debts until nothing is left. Employee have a $10,950 priority for all wages earned within 180 days of the filing of the bankruptcy petition. So, to that extend, employees get paid before other creditors. But, ultimately there will be nothing left, so I'm uncertain why it matters to you who gets paid what amount.

Edited by socrateaser on 2/2/2010 at 8:33 AM EST
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