Legal Question in Bankruptcy in Pennsylvania
Continuation of benefits
I have a decent severance package with my current employer, consisting of wages and medical benefits. It would be paid in normal biweekly payroll checks. My company is in trouble. One solution being considered is to file a pre-packaged bankruptcy and then an investor would buy the company out of bankruptcy - obviously wiping out a lot of debt in the process. If I were terminated prior to the deal, is the new owner obligated to keep paying my severance until it expires and what can I do, before or after, to protect this benefit?
1 Answer from Attorneys
Re: Continuation of benefits if company is in bankruptcy or is sold
If the new owner is not in a bankruptcy, and the new owner purchases all of the old contracts, the new owner should be obligated to perform those existing contracts. However, if the present employer files bankruptcy, the code allows for the company to reject the contract. You would then have an unsecured claim and would be treated proportionately with all other unsecured creditors.
Before a debtor in bankruptcy can take such action, it must file a motion and you would have the opportunity to defend yourself. You should take note of any notices you receive and review them with a bankruptcy practitioner promptly.
I trust this has been helpful, but feel free to call or e-mail with further questions.
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