What Happens to Your Wage Claim If Your Employer Closes or Files Bankruptcy

Employers go out of business. When that happens, workers with unpaid wage claims have options — but they need to act quickly and in the right order.

Bankruptcy Priority

In a business bankruptcy, wage claims have priority status — they’re paid before most other unsecured creditors. Workers who file claims in the bankruptcy proceeding may recover some or all of their unpaid wages, depending on the assets available. The cap on priority wage claims under federal bankruptcy law is substantial.

A wage claim filed with the DLSE survives the employer’s bankruptcy. Workers who have already filed with the DLSE can convert that claim into a bankruptcy proof of claim. Workers who haven’t filed yet should file with both the DLSE and the bankruptcy court simultaneously. Speed matters when assets are being liquidated.

The California Wage Theft Recovery System gives workers the exact tools and templates to document violations, calculate what they’re owed, and file the right claims at the right agencies — without paying an attorney to get started. Request your free evaluation here.