If a company files bankruptcy, will you be given unemployment benefits?

Written by S. Arteta and Fact Checked by The Law Dictionary Staff  

A company may file bankruptcy under Chapter 11 and Chapter 7. If the company opted to file the bankruptcy under Chapter 11, the company will have the chance to pay their creditors and stay in business during the proceedings. However, if the bankruptcy was filed under Chapter 7, the company will have to cease to operate its business and all its assets will then be liquidated to pay off the company's debts.

In a bankruptcy proceeding, all rights of the company, it's employees and it's debtors are protected. If the company filed bankruptcy under Chapter 11, all the wages and benefit plans of the employees will be preserved. Once filed, the employees may inquire as to the status of the case from their benefit plan administrator. If the bankruptcy is filed under Chapter 7, all employees will then be notified of the filing of the case with the contact details of their benefit plan trustee. Said trustee shall also be in charged of the pension and profit sharing plan administration.

Under the law, all workers whose work were terminated for causes beyond their control must be given unemployment  benefits. Unemployment benefits or unemployment compensations are paid by the government to workers who have become unemployed for causes which are not their own making. The source of said benefits is taken from the state and federal payroll taxes levied against employers or business entities.

There are certain conditions to comply with in order to be eligible for unemployment benefits. Generally, the employee must have been employed as a full time worker, the employer must have paid the Federal Unemployment Tax Act (FUTA) and that the cause for the termination of employment was beyond the means and control of the employee. Unemployment insurance cannot be availed of by the following: part-time, temporary, and self-employed workers and school graduates.

Generally unemployment benefits are applied for and there may be reasons for the refusal or denial of an application to avail of said benefits. These include the following: not being able or available to work, voluntary separation from work without good cause, discharge connected to misconduct of the employee, refusal of suitable work, and unemployment resulting to labor disputes.

Other conditions set forth by law are as follows: the wage earned and the time worked during a certain period of time which is referred to as the "base period". Both of these conditions, taken together, shall determine the period for the award of the benefit and the amount of benefit to be given to the unemployed. Usually, the amount given is $293 minimum.

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