When a Florida company files for bankruptcy, the workers might worry about receiving their salaries like the drivers who worked for Jevic Holding Corp. They had to take their case all the way to the Supreme Court of the United States after lower courts ignored their $8 million claim for damages while settling the Chapter 11 case for other creditors and paying the lawyers involved. In a 6-2 ruling, the Supreme Court declared invalid the structured dismissal approved previously. The majority of justices agreed that the case could not disregard bankruptcy laws that determine who gets paid first when a business goes bankrupt.
During a Chapter 11 business bankruptcy, creditors are ranked into classes of priority. A structured dismissal allows one group of creditors to be paid while other groups go unpaid. The truck drivers asserted that their classification should have had a higher priority than the creditors that were granted compensation.
Justice Stephen Breyer wrote that the law did not grant exceptions to existing priority rules unless all affected parties approved the plan. Justices Clarence Thomas and Samuel Alito dissented because they believed that the truck drivers had altered their case after the Supreme Court agreed to review it.
Many complex legal questions could arise during a business bankruptcy. If business owners are considering Chapter 11 bankruptcy for debt relief, the advice of a lawyer could guide them through the process. An attorney could research how creditors might be classified and explain which debts might need to be paid first. When preparing the plan, an attorney could organize the financial records for the business and manage the claims of competing classes of creditors during negotiations.
Source: Courthouse News, “Workers Prevail in High Court Bankruptcy Fight“, Kevin Lessmiller, March 22, 2017