Impending Bankruptcy 7

[Beggar]

I'm not sure where to post this so I'll put it here since it's sort of "How Do I Get Ahead" issue.

The start-up for which I work is looking ever closer to flaming out.

Has anybody ever been through this?
Do you have any advice?
Are there any steps that I should take in order to protect myself as best I'm able?

I've got a "guaranteed" severance deal but I'm guessing that with bankruptcy, that paper's worth about as much as the stuff on the roll in my bathroom.

I'm chewing up my vacation accrual as fast as I can, just in case.

Any other thoughts?

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How much do YOU owe?

http://www.brillig.com/debt_clock/

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[MedicineEng]

Update your CV and get out of there.

 

[IRstuff]

Depends on which type of bankruptcy. Large companies such as Delta, Chrysler, etc., have into and out of bankruptcy. Others, such as Montgomery Ward, simply die.

TTFN

 

[MikeHalloran]

I asked my friend and supervisor, Pete, about the obviously worsening condition of our division, once the world leader in flight simulators controlled by analog computers, at a time when digital computers were, well, you know the rest of that story. He said "Don't worry about it."

Not so very long after that, the entire staff was asked to gather for an important announcement, which was that the division was being closed, that very day, and we were to pack up our personal belongings and leave.

As the echo of the announcement died out, Pete said, loudly enough for everyone to hear, "NOW, worry about it."

Since then, I've ridden quite a few companies through similar "controlled flight into terrain", and been ejected as a few others were trying to stop losing altitude.

I've always stayed until I was asked to leave, out of a sense of loyalty, or pride, or maybe hubris. I can't say it's been good for my career.

Oh. Yeah. In a bankruptcy, lots of money, especially what you thought was yours, just flat disappears, severance and pensions included. Promises and guarantees and even contracts are instantly rendered worthless. There will be no warning.

Don't pass up a mediocre opportunity.



Mike Halloran
Pembroke Pines, FL, USA

 

[ajack1]

Beggar, sorry to hear your news. I am sure what “rights” you have will depend on where in the world you are as much as the company, namely the legal system of that country.

With bankruptcy in the UK a lot depends on “how” bankrupt the company is as to how much you get.

As has been said it is not uncommon to be told and ask to clear your desk and leave now, I have even heard of people with company cars being told to find their own way home with all their personal belongings.

Basically a third party will seize any assets the company has and get the best price they can for them as well as getting in as much money as possible that is owed to the company. From their all parties owed money by the company will get a percentage of what is available, at least that is roughly how it works in the UK.

This is a very slow process and you are usually looking at months if not years rather than weeks and the chances are that the owners of the company will have taken legal advice and cleared out what they can already, so the percentage will not be high. So your piece of paper will be worth something, just not very much.

As others have said brush up your CV and get networking.

 

[MintJulep]

Mike has summed things up pretty well. Just a few specifices to look out for.

Employer contributions to 401(k) or other retirement plans may have stopped some time ago. Check on them.

If the retirement plan is managed by the company (rare these days), cash out NOW!

If you have a guaranteed severence deal, execute it NOW, before the company is legally in bankruptcy. Once in bankruptcy you will simply join the (long) list of creditors, and at best will get only a portion of the amount.

The employer may have stopped sending taxes to the government on your behalf, although they may still be deducting them from your paycheck. Check on them.

Talk to vendors (who are also creditors), they very often know more about the position of your company than employees do.

You are in compitition with all the other employees for the similar jobs with other companies in your city. Act accordingly.

 

[PSE]

Beggar,

Your first loyalty is to yourself. I agree with MedicineEng that it is definitely time to look elsewhere and the other posters who have given suggestions on ways to at least check on things that could otherwise turn into nasty surprises. Hopefully you are using your vacation days to job search and interview. Time is not necessarily on your side at the moment.

In my past I left an employer to join a start-up. Shortly thereafter, several major officers at my former employer decided to sell their private stock into the employee stock program and "retire". I was two weeks away from being able to cash out and roll my account into a 401K with my new employer when I received the re-valued statement. I basically lost 40K US.

After several years with this start-up, we found that the president was going to sell the company to an overseas company. I started looking shortly thereafter. That company has since disappeared being "absorbed" by the new parent.

My point is that the officers, even within bankrupt situations, likely have their own exit strategies in place well before making such decisions. You should do the same.

Good luck

 

[mizzoueng]

Where do you work? B/c I am in the same boat. Get your name out there and start looking, and start evaluating your loyalty to the company. How long can you stay? How long do you HAVE to stay? I would go ahead and start filling out the "guaranteed" severance paperwork so as soon as you know the next one is on the horizon, you can get your money.

 

[lostsailor]

In my view, unless a company has demonstrated otherwise, one owes them nothing, including loyalty. The first consideration an employee has is to themselves and their family. Having spent the better part of the last decade going through various sales/mergers/acquisitions and the numerous shaftings that generally seem to accompany these "business" activities, I have found it prudent to take care of myself first. You can bet those individuals making the decisions affecting your life certainly are. Good luck and CYA.
Regards,
RLS

 

[Beggar]

Thanks, folks.

I should have mentioned that I am in California.

I would execute my severance right now but it's a one-sided deal -- it only pays if I'm terminated, not if I resign.

The caution about tax deposits is a good one. I will contact the state EDD and ensure that those deposits are being made. A prior employer played that game with the 401k deposits and the medical insurance. In this job, there is no 401k so that money's not at risk.

I am actively looking and will jump as soon as possible. That decision is made a little harder by the fact that I'm presently receiving a pay premium and there's still a chance that things could work out and those options would be worth something. I'm focusing on a couple of blue-chip employers and then will broaden my search once I know for sure that we're done.

I'm considering asking the boss if he'd be interested in making me a good deal on some company equipment on a lease-back arrangement.
Our company is very small and bankruptcy for us will mean liquidation although

--------------------
How much do YOU owe?

http://www.brillig.com/debt_clock/

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[MintJulep]

If the severence deal only works if you get teminated than timing is important.

If you are on decent terms with the boss, try to work it out so that if it beccomes inevitable, you will be "terminated" BEFORE bankruptcy becomes offical.

This should get you your deal before the creditors start lining up (assuming that there is actually any money left to give you).

 

[casseopeia]

Beggar,

In the US, bankrupcy are laws are such that, after liquidation, employee wages are paid first, then accrued vacation, which is treated the same as wages (it's called the Golden Bear rule for a case Golden Bear Resaurants v. __). Payout can take about 2 years (which is about the maximum in CA). Usually no compensation for other benefits like sick time and bonuses.

After that, I believe attorneys fees are paid, usually in full, but occasionally less than billed. There are some formulae for determining fair billing practices which are stringent. Creditors get what is left, usually split on a straight percentage of what they are owed, e.g. 10% of curent billing, through an established date for everyone, no exceptions. That date is normally the same as the Chapter 11 or 13 filing.

All of this works well when there are sufficient assets to sell. If it is a service company with your everyday computers and office furniture, there may be a problem just paying our wages. Bear in mind that a lot of companies operating on a shoestring may opt to lease a sustantial portion of their equipment. Even computers are leased. That stuff goes back to the lease holder. That leaves a half a canister of Folgers coffee and a few reams of 8-1/2 x 11 bond paper, and worthless letterhead stationary.

Your promised severence isn't worth squat unless you are fired and the company decides to pay it, which is in doubt because it will only hasten the cash crunch and there is no legal requirement to pay it, and no penalty for not paying it.

If you are using your accrued vacation to search for a new job, then good. If you are using it to drown you sorrows in umbrella drinks in the Caribbean, then not so good.

Get out ASAP with all of your assets including 401k, owed expenses and personal equipment (which can be seized without prior notice) Unfortunately it takes a Hurculean effort to get them back.

If that happens and you want your stuff back, the best you can hope for is an auction where you are offered the opportunity to purchase your stuff back. Don't even keep a coffee mug nor box of tissue there if its important to you. Don't leave your jacket at night...

....AND KEEP US POSTED I've got my fingers crossed for you.

"If you are going to walk on thin ice, you might as well dance!"

 

[Beggar]

Thanks for the detail, Casseopeia.

I hadn't thought about the personal property. I should probably get that out this week.

I'm owed a few expenses but have been very careful to charge everything on the company card.

Based on a variety of sources, I think we've got a few weeks or even 3-4 months of burn before we flame out and we do have a fighting chance of making it.

Such is life in an underfunded start-up, I suppose. The writing's been on the wall for a while so I've been saving my cash and thinking about what I want to do next.

--------------------
How much do YOU owe?

http://www.brillig.com/debt_clock/

--------------------

 

[casseopeia]

Thought of a couple more things. Does that company credit card have your name on it and can you be held responsible for the debt if it is not paid off? Might be a good thing to check on that as well. As an aside, your unpaid expenses go into the creditor column, not the wages column. Debt on a credit card where you are the guarantor is all yours, useful only as an un-reimbursed deduction on your income taxes. If you end up leaving with unpaid expenses, don't forget to add that to your deductions if you itemize.

You are also entitled to copies of your personnel file and samples of your work product. A labor attorney advised me one time that I could liberally apply the concept and copy a whole lot more, including Client lists. His opinion was that it was not so much that I had copies, but what I did with the information. Sort of the 'no harm, no foul' rule.

If the company is going Chapter 13, you are allowed far more latitude in the use of those materials. Chapter 11, re-organization, is a little different. Use good judgement. If you suspect the potential for a real problem, consult an attorney before you use proprietary information.



"If you are going to walk on thin ice, you might as well dance!"

 

[Beggar]

The company credit card does have my name on it as well as the name of the company. I don't believe that I'm a guarantor and didn't knowingly sign anything to that effect. It's probably worth calling the bank, though.

It doesn't *seem* like I should/could be personally liable for debts legitimately incurred on behalf of a corporation.

That's kind of scary.

Thanks for the "heads up."

--------------------
How much do YOU owe?

http://www.brillig.com/debt_clock/

--------------------

 

[IRstuff]

Usually, at least at my work, the "company" credit card has ME and only ME as the user, so we usually have to pay it off and then get reimbursed.

TTFN

 

[Ashereng]

Beggar,

When I had a company credit card (Fortune 500 company, and closeer to 1 than 500), it was "MY" credit card. I am 100% responsible for any charges on it - not my company. It was an American Express. I never had a non American Express company credit card. Not sure what that says?

"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

 

[lewtam]

I too have the company Amex - policy is that to protect the company from misuse of the card, the card is my responsibility. I have to pony up if my boss rejects an item on the statement, so it may follow that if the company goes arse up I'm liable for the balance.

LewTam Inc.
Petrophysicist, Leading Hand, Natural Horseman, Prickle Farmer, Crack Shot, Venerable Yogi.

 

[dik]

Casseopeia:
Do you have the equivalent of a secured creditor in the US and if so, where does he fall into the claimant order?

Dik

 

[Ron]

Check with a lawyer, but I don't think employees get "secured creditor" status. They might get priority up to a certain amount of wages to be paid, but I believe there's a limit on that (a few thousand bucks).

If you have a severance agreement, make sure it is a true contract. If it is, you will likely get priority of payment in a bankruptcy, though almost never the full amount. Check your state...there might be a means of filing a lien for your services.