However, more fortunate unsecured creditors are said to have “priority claims” against the bankrupt debtor. Employees of a bankrupt company frequently fall into that category and have such priority claims.
Specifically, employees who continue to work for the bankrupt employer after the date of the bankruptcy (this means generally only an employee of a “restructuring” company) have the ability, to the extent that their work benefited the bankrupt company, to claim that post-petition wages and other amounts due to them are an “administrative” expense of the estate. Creditors who hold claims for administrative expenses generally have those expenses paid in full before any of the other unsecured creditors receive anything. Thus, employees who work on after the date of the bankruptcy are given favorable treatment under the Bankruptcy Code.
Employees whose employment is terminated on or before the date of bankruptcy get less favorable treatment; however, they are entitled to a lower order “priority claim” that often allows them to receive at least partial payment for unpaid compensation before most of the other unsecured creditors. Specifically, an employee whose job is terminated on or before the date of the bankruptcy (or the cessation of the employer’s business) is entitled to recover claims up to the amount of $10,950 for wages, salaries, commissions, accrued vacation pay, accrued severance pay and sick leave pay that was earned within 180 days prior to the date of the bankruptcy.
Finally, there is a similar priority claim for unsecured claims of an employee for contributions to an employee benefit plan that arise from services rendered within 180 days before the date of the filing of the petition.