How Do I Get My Final Paycheck If My Employer Is Filing Bankruptcy?

When you find out your employer is filing for bankruptcy, your last paycheck may be your first concern. But if you keep your cool, you avoid a larger, more personal financial crisis.

Advance Notice Of Closures And Layoffs

Some business closures and mass layoffs require advance notice. The federal WARN Act and Washington’s separate layoff-notice law can require 60 days’ written notice, but each has its own coverage rules and exceptions. Sources: 29 U.S.C. § 2102; Chapter 49.45 RCW.

Final Paycheck Claims And Wage Priority

Under bankruptcy law, eligible unsecured pre-filing wage claims have fourth priority, not first priority. As of October 2026, the adjusted cap for cases filed on or after April 1, 2025 is $17,150 in total per employee across the covered types of pay. It covers qualifying pay earned within 180 days before the bankruptcy filing or cessation of the employer’s business, whichever occurred first.

Earned vacation, severance and sick-leave pay can qualify, along with wages, salaries and commissions, when legally owed. Older or excess wage claims may still be allowed as general unsecured claims. Qualifying employee-benefit-plan contributions have a separate, limited priority. Priority does not guarantee payment. Sources: 11 U.S.C. § 507(a)(4)–(5) and dollar-adjustment notes; 11 U.S.C. § 104(c); 11 U.S.C. § 502.

Bankruptcy Chapters And Payment Priority

It also matters what kind of bankruptcy the company is filing. Chapter 11 may allow a business to reorganize and keep operating, but survival is not guaranteed; it can also result in liquidation or conversion to Chapter 7. Source: U.S. Courts: Chapter 11 bankruptcy.

In Chapter 7, a trustee administers and liquidates available estate assets, subject to secured creditors’ rights. Payment depends on available funds and the legal priority of each claim. Source: U.S. Courts: Chapter 7 bankruptcy.

Allowed administrative expenses generally rank ahead of pre-filing wage claims; a pending lawsuit does not by itself create a higher priority. Wages for work performed after filing may qualify as administrative expenses. Sources: 11 U.S.C. § 507(a)(2)–(4); 11 U.S.C. § 503(b)(1)(A).

COBRA Coverage Questions

Bankruptcy alone does not automatically end COBRA rights. Continued coverage depends on the plan and eligibility rules, and can end if the employer stops providing all group health plans. Ask the plan administrator about your coverage. Sources: 29 U.S.C. § 1161; 29 U.S.C. § 1162(2)(B).

Final Pay Timing And Bankruptcy Claims

If your employer closes its doors, do not wait weeks or months to check your rights. Washington’s Department of Labor & Industries (L&I) explains that final wages generally must be paid by the next regularly scheduled payday. If the employer has filed for bankruptcy, however, L&I’s complaint guidance directs workers to the bankruptcy proof-of-claim process rather than an L&I wage complaint against that employer. Read court notices promptly and seek legal advice about any claim-filing deadline and your options.

Discuss Your Bankruptcy Questions

Over the past 35 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can review whether bankruptcy may help stop your garnishment and address your debts through a repayment plan. Sources: 11 U.S.C. § 362(a)–(d); U.S. Courts: Chapter 13 bankruptcy.

If money has already been garnished, recovery may be possible in some cases, depending on the timing of the transfers, applicable exemptions and other legal requirements. A refund is not automatic or guaranteed. Sources: 11 U.S.C. § 547(b)–(c), (e)–(g); 11 U.S.C. § 522(g)–(i); 11 U.S.C. § 550(a).

But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.