If your boss who is an owner of a small business files for chapter 11 is he still legally obligated to pay what he owes you for your labor or can he get away with not paying his employees?

Answer 1

Bankruptcy courts ALL recognize the priority duty in parcelling out the assets of a failed business is to pay creditors. Unpaid employees have a high-priority, statutory claim for wages. You probably get paid ahead of other creditors ... but you may not get all that's owed you.

Answer 2

Back pay is actually a claim item...although it is virtually always at the highest of priority and allowed to be paid by the "first day orders". After that.. going forward...more so than ever..they must do so and provide documentation to the court...that they are doing so...or things get very ugly for the Co and its officers.

Answer 3

It depends. Many Chapter 11s are filed with "first-day orders" that allow the business to keep paying its employees as if nothing happened; that's common if they want to stay in business. If not, you'll have to file a claim with the bankruptcy court; however, each employee's first $4,000 in unpaid wages & benefits is considered a "priority claim" that must be paid before most other unsecured creditors.