What are the implications of working at a company that goes bankrupt.
For example, I know that I would not be able to get at deferred compensation but there are issues such as - 401 K, benefits, job (not all disappear)-- in fact it may be advantageous for the employer/employee to file for bankruptcy.
What’s the good (if any), bad and the ugly?
The 401(k) money is still yours (although there are heavy penalties for taking it out early), but, of course, any of the 401(k) that was invested in the employer’s own stock becomes pretty much worthless.
I always found it annoying that companies required people to invest 401(k) money in their own stock, it was putting all the eggs in one basket, as Enron shows.
Depends on where you live. I was in a similar situation in California 10 years ago – my employer hadn’t paid me in several months, so I looked into my legal options.
In the course of that research, I discovered that employees are near the bottom of the heap when it comes to bankruptcy – i.e. just about everyone else gets paid off first. I don’t know how 401k’s factor into that – note, however, that many such plans invest heavily in the company’s own stock, which would presumably be battered in the event of bankruptcy.
My advice, as obvious as it may be, is to look for another job. No good will come from working at a company while it goes bankrupt. Even if they can still pay you, there is no future there.
What is the good? They probably won’t care about your job search so will be pretty much free to surf the job sites, skip work for interviews and so on.
For some anecdotal evidence of what can happen, hop on over to the Detroit News http://www.detnews.com and look for just about anything in that last year about a company called Detroit Center Tool (DTC).
In short, they pulled kind of an Enron, and announced their bankruptcy on a single day and sent everybody home without paying them.
Of course you might be able to transfer some or all of your 401K funds to other investments in the plan (most offer a variety). Of course if ALL of the employees of my company got wind of a possible bankruptcy and all 16,000 of us shifted 401K allocations to protect our retirements it would probably send our stock into some kind of death spiral when the trading houses heard the employees were bailing on their stock en masse (if they didn’t know before us in which case we would just be adding insult to injury).