stateoconfusion
Junior Member
What is the name of your state (only U.S. law)? CA
A friend and I work for a small company that's been in financial trouble and is a couple pay periods behind on payroll. Lately they've been able to keep from falling any further behind by paying the oldest past due paycheck on each payday. We've accepted that in order to help the company "weather the storm" and survive, which would be the best outcome for everyone. Of course, there's some chance the company may not survive, and I'm worried about what may happen in the event of a BK filing.
Specifically, I'm worried about the trustee's avoidance power under sec. 547 of the Bankruptcy Code. I know that the trustee can't avoid a transfer made in the "ordinary course of business." I figure this means that current payroll is not subject to avoidance because it's a normal and regular expense of doing business not a preferential payment of an antecedent debt. But are we put at risk of avoidance by each paycheck going through a period of being past due? Could that be interpreted as each paycheck being a payment made by a debtor to a creditor rather than an expense in the ordinary course of business? If so, would it be safer if we asked the company to pay us only for the current pay period on each payday, and maintain the 2-3 pay periods that are currently past due as a payable to be settled when things are more stable?What is the name of your state (only U.S. law)?
A friend and I work for a small company that's been in financial trouble and is a couple pay periods behind on payroll. Lately they've been able to keep from falling any further behind by paying the oldest past due paycheck on each payday. We've accepted that in order to help the company "weather the storm" and survive, which would be the best outcome for everyone. Of course, there's some chance the company may not survive, and I'm worried about what may happen in the event of a BK filing.
Specifically, I'm worried about the trustee's avoidance power under sec. 547 of the Bankruptcy Code. I know that the trustee can't avoid a transfer made in the "ordinary course of business." I figure this means that current payroll is not subject to avoidance because it's a normal and regular expense of doing business not a preferential payment of an antecedent debt. But are we put at risk of avoidance by each paycheck going through a period of being past due? Could that be interpreted as each paycheck being a payment made by a debtor to a creditor rather than an expense in the ordinary course of business? If so, would it be safer if we asked the company to pay us only for the current pay period on each payday, and maintain the 2-3 pay periods that are currently past due as a payable to be settled when things are more stable?What is the name of your state (only U.S. law)?
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