While in general what you are saying is true, employees owed wages are the highest seniority of creditor. As long as you were selling furniture for reasonable prices to make payroll, you should be fine.
https://usbankruptcycode.org/chapter-5-creditors-the-debtor-...
Wages are fourth priority, but only up to $12,850 per person (one month's salary at ~150k a year).
The three priorities above wages are child support (not really applicable to corporate bankruptcy i assume), liquidator's expenses, and some mildly complex case i don't really understand. Taxes are eighth, two behind grain farmers and fishermen (lol America).
I think that this list might be talking about unsecured claims though. I think that secured claims might be separate. So, for example, if an individual declares bankruptcy and they owe $500k on their house, that claim would come before child support payments. I am definitely not a lawyer and bankruptcy law strikes me as particularly complex.
The third priority is tough to parse. From looking over it quickly, it seems like this might be claims from doing business between when i file bankruptcy and when i go into foreclosure. Again, not a lawyer, but my guess here is that if I'm a store and I file bankruptcy on Monday, but don't have a trustee until Wednesday, and I put in an order for a palette of water bottles on Tuesday, then the distributor of the water bottles might have a priority claim.
[Edit] Legally how is it. Not just because it's commonly measured in months of wages
Way more commonly, severance is part of a termination contract, and thus it would not be here.
Are you European? Maybe it's different there.
My assumption was that we would not be talking about "unpaid severance" if there was no severance defined in the first place.
> Are you European? Maybe it's different there.
Generally severance is not legally mandated, but can be mandated under some specific circumstances, e.g. no-notice termination. Usually it is similar to US: either defined in collective (union) agreement or part of termination contract.
Usually severance is consideration for agreeing not to sue the company, not taking trade secrets, etc.
They look really similar, but legally entirely different.
In "gardening leave" you're still an employee and on payroll until the last day. Whereas severance you're not an employee and typically paid lump-sum (but doesn't matter for this discussion). So in this specific situation, yes, that would be wages and would be paid out first before creditors because you are _legally_ entitled to those wages.
The problem of course you cannot hope to put a whole company on "gardening leave" in hopes that it can "act as severance" for everyone. Your creditors will sue you and easily win. They'd probably put an emergency injunction on the company and remaining funds before the first month was even completed once they learned of "creditors hate this one little trick!"
You have X months notice ie the company has to tell you X months before yoir severance date.
Often the company will want somone they let go out of the office ASAP. Thus you spend your X months on gardening leave paid as normal wages.
On your severance date you get your redundancy package - in the UK there is a defined minimum but in some markets e.g. finance they pay more as they do want to keep current employees happy so they see that they just don't get thrown out.
As much of the US is at will employment I doubt this scenario will occur often
But yes this grandparent post is mostly correct. If severance was not built in to any loan contact (it never is). Then creditors are paid first.
It would be interesting to know how much debt they have vs remaining cash and when did it dip below.
Paying severance is extremely low probably even below equity since there's no legal requirement to pay severance.