If a company files Ch 11 bankruptcy then the assets are sold to another company, are employment contracts honored?

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If a company files Ch 11 bankruptcy then the assets are sold to another company, are employment contracts honored?

If a company files Ch 11 bankruptcy, then the assets (including employees) are sold to another company and the judge grants the sale, does the new company have to honor employment contracts or do they become void and new ones have to be signed?

Asked on March 30, 2012 under Bankruptcy Law, Texas

Answers:

Michael Duffy / Duffy Law, LLC

Answered 9 years ago | Contributor

Hi there,

It would likely be at the discretion of the bankruptcy trustee. If the trustee decided it would be in the best itnerests of the creditors and necessary for the survival of the company to void and/or renegotiation certain contracts, then they are generally permitted to do so. If you're question is in regards to organized labor, the old contract might be voided by the new owner would still likely have to renegotiate a new contract with the union.


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