Will my severance package stop being paid if the company that laid me off goes in bankruptcy?

I was laid off and the company and I signed a severance package agreement to be paid in 25 weeks including medical plan. Now is a rumor that the company will file bankruptcy by next month and my bi-weekly severance ends in 5 months. If that happen will I loose my severance?

Asked on March 22, 2017 under Employment Labor Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You could lose it: bankruptcy can affect all debts and obligations, including severance or other employee pay or benefits. While generally payments to employees have more or higher "priority" than most other debts (like to the electric company), that only means that if there is enough money to pay some debts, yours is more likely to be paid in whole or at least in part--but if their economic situation is bad enough, you may see nothing or next to nothing (e.g. dimes or pennies on the dollar) of what you are owed. And, regardless of how much you may ultimately be paid, the bankruptcy process will almost certaily "stay" or freeze/delay payments for at least some number of months.

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