About Us  > Blog

Bankruptcy – what happens when your company has to declare bankruptcy?

by Catherine Muriel on 06/4/09

In this economic downturn unfortunately this is happening more and more. There are two types of bankruptcy that a company may file – Chapter 11 or Chapter 7. Depending upon which they file, it affects the safety of your job and therefore your benefits.

Chapter 11 allows the company to restructure. Many large corporations have done this such as the Tribune Company (the publisher of the Chicago Tribune and the Los Angeles Times), United Airlines and of course, GM.

Chapter 7 is the complete shut down of a company. As a result of this all future benefits to the employee are terminated. If you have a 401(k) with this company the 401(k) will be liquidated and the assets will be distributed. You can then roll these funds over into an IRA to avoid tax penalties.

Chapter 11 more than likely means that your position may be retained; however you could be facing financial cutbacks such as reduction in salary and even benefits.

With regard to a Chapter 11 filing, it is important to know your legal rights as there are laws that protect you:

- Your pension plan can be dissolved – a court decides whether the company can continue to cover the plan.  Unfortunately the pension plan can be dissolved, however The Pension Benefit Guaranty Corporation guarantees up to $51,000 per person per year in 2008 for people retiring at age 65. You can visit their website to learn more. 

- Your 401(k) assets – these have to be held in a trust account and cannot to accessed by your employer or creditors.  However, as mentioned earlier, one of the cut backs you may experience is the ceasing of matched contributions.

- Your health benefits may be reduced – if you are let go you can use the coverage from your employer for 18 months through COBRA. However, look around for alternates as there are less expensive options out there – some people have said that Costco has a good option. There are websites you can visit to do some comparison shopping.


Leave a Comment

Prosper moderates all comments and will approve those that are directly relevant to the post. We do not publish comments that are spam, are offensive or appear to pass you off as another person.

(required)
(required) Email will not be published.
 

Comment Policy

 

*
To prove you're a person (not a spam script), type the security word shown in the picture. Click on the picture to hear an audio file of the word.
Click to hear an audio file of the anti-spam word


posted in Borrowers,Personal Finance Education no comments »

Connect with us

Search

Borrowers

PROSPER HITS ANOTHER RECORD: $100 MILLION IN APRIL ORIGINATIONS

By Prosper on 05/1/14   [ 3 ]

Just one month after announcing that we crossed $1 billion dollars in loans, I’m happy to report that we’ve hit another significant milestone. In April, a record $100 million in loans was originated through the platform. This is up 400% from one year ago and 30% month-over-month. More importantly, it is indicative of the incredible [...]

Read More

Prosper Gives Back: A Social Timeline Recap

By Prosper on 04/10/14   [ 0 ]

As of yesterday, the Prosper Gives Back campaign has come to a close. After hitting our $1 billion dollar mark, we connected with the whole Prosper community, we spoke with you guys, and we celebrated our butts off! While giving out $2,000 a day was exhilarating and fun, the greatest reward to us was hearing [...]

Read More

Prosper Crosses $1 Billion in Loans Funded

By Prosper on 04/3/14   [ 0 ]

Today is a huge day for Prosper. We crossed over the $1 billion mark in peer-to-peer loans. Its been a long road since the first loan in 2006. Since then the $1 billion dollars issued through Prosper went towards helping people fix their debts, pay medical bills, chase their dreams, and much more. The greatest [...]

Read More

« Older Entries

Monthly Archive


Notice: Blogs and other materials posted on or linked from this page that use the name "Prosper" generally use that name to refer to Prosper Marketplace, Inc. if published before January 31, 2013 and to refer to Prosper Funding LLC if published on or after February 1, 2013.