From: west@mgmt3.ncsl.nist.gov (Jim West)
Newsgroups: misc.jobs.misc
Subject: Re: What Happens When Your Company Closes?
Date: 13 Apr 92 12:36:28 GMT
Organization: National Institute of Standards and Technology, Gaithersburg MD.

In article <1416@newave.UUCP> john@newave.mn.org (John A. Weeks III) writes:
[Story about his company and why they might fold]
>If they do close, I assume that I will be left holding a
>paycheck that I cannot cash, plus I will be owed for 6 weeks
>of built-up vacation and travel expenses for the past two months
>(currently about $3500).

>Where does this leave the employees sitting? 

As unsecured creditors.  You might want to try and take some of that
vacation or get some of travel expenses back before bankruptcy (If they
have the money).

>Since the company
>has nothing to liquidate (everything is on lease), there is
>nothing for a bankruptcy court to sell off to generate any
>cash. 

That means it is very likely you will get nothing out of the
bankruptcy (remember, secured creditors will get paid off before
you).

>Will the state or federal government step in and cover
>the paychecks? 

I really doubt it.  (In a sense, why should my taxes cover your risks?) There's
a federal pension guaranty fund (but I'm not sure if it covers small businesses).
I believe you will be able to deduct the unreembursed travel expenses from your
taxes (deduct, not credit); I'm not sure about accured vacation time.

>Are the owners personally responsible for
>paying wages if the company cannot?  Will they also cover 
>things like past travel expenses and earned vacation?

That depends on the structure of the business entity.  If the 
business is a corporation, the owners are not personally responsible
for the depts.  Legally it is possible to "pierce the corporate veil"
at which point you can go after the people who ran the corporation
for the debts of the corporation.  This is not trivial; I think you
have to prove fraud on the part of the people who ran the corporation.

However, if the business entity is organized as a partnership or proprietorship,
the owners are personally responsible for the debts of the organization.
Still, the owners can declare personal bankruptcy and then you become an
unsecured creditor to them (If they don't own anything, you won't recover
anything)

>Has anyone been through anything like this in the past?  If
>so, please let me learn from your experiences...

I haven't been through anything like this, but I have heard horror stories
from people who had corporate credit cards for things like travel.  They have
$5,000 on the card when the company folded.  They were left with the responsibility
of paying off the card.

In the past, when I have sat down with an attorney, it has only cost between $40-$50
for a half hour consultation.  You leave feeling much more secure and knowing your
options.  I can't be certain that I remember the correct areas of law (I'm not an
attorney) that affect you.  You might want to contact an attorney if you are worried.

I'm really sorry you in the situation your in.  Could you post a follow up telling us
how this turns out and what you learn from the experience (like how to avoid it in
the future?)  Good luck.

Jim
-- 
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Jim West
National Institute of Standards and Technology
west@mgmt3.ncsl.nist.gov