Legal Question in Bankruptcy in California

My company laid off most of its staff (including me). When they laid me off they reimbursed my expenses, some of which had been incurred several months before. They were then forced into bankruptcy a month later.

Now I'm being asked by the creditor trust to pay back my expense report reimbursements, because they call it a "preferential payment". Can employee expenses be clawed back in this way? Are there valid defenses against this? Is it even legal for a company to NOT pay the money owed when they lay off an employee?

Asked on 6/13/16, 3:39 pm

1 Answer from Attorneys

Dennis Winters Winters Law Firm

First, I don't know who the "creditor trust" is. Is this a Bankruptcy Trustee or some other party?

Second, while a Bankruptcy Trustee or other authorized entity appointed by the Court may pursue "preferences" received within 90 of the filing, there are defenses such as for payments made in a manner in which the company had ordinarily done business. That is, did they often delay reimbursement for a couple of months?

Often trustees make blanket demands on everyone who got a check in the 90 days before BK, but only pursue it with a lawsuit if it is for a lot of money and it appears payments was not made in the ordinary course of business. Without reviewing how much you received and the entire circumstances, I can't say for certain if it is something the trustee would likely file a lawsuit to recover.

While it is illegal for a company to fail to pay employees, once a BK is filed a lot of the rules go out the window.

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Answered on 6/13/16, 3:58 pm

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