Five Minutes With

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The San Antonio Business Journal dialed up bankruptcy attornegy Elliott Cappuccio forthe answers. Cappuccio is a partner in , whered he represents creditors and debtors in a variety ofbankruptcy matters. Cappuccio often is retainedd as special counsel for bankruptcyt trustees and has assisted trustees in the recovery of morethan $3 million during the last few years. Recognizedr as a Texas Super Lawyer Rising Starby , Cappucci o has been known to take his bad couryt days out on an officr punching bag. Q. If a company filesw Chapter. 7 liquidation, what happends to employees’ health and pension benefits? A.
employees have the option to continue healtj coverage under COBRA aftedr losinga job. However, COBRzA typically does not applyh after an employer files for bankruptcuy underChapter 7. This is becaus e COBRA does not extend to members of healtb plans after the entird planis terminated. On the othef hand, traditional pension benefits should survivd the Chapter7 filing. Q. If a firm files Chaptert 11 reorganization, what happens to those same health andpensiohn benefits? A. Employee healthu and pension benefits usually fare better in a Chaptert11 reorganization. Under most circumstances, the court cannot unilaterally change most health and benefitf plans underChapter 11.
However, in some employees may be persuadedto “agree” to benefir concessions in order to help make the plan of reorganizationb more feasible, and in the hope that their companuy (and their jobs) survive the bankruptcy. Q. Is thers a difference in how traditiona pensionand 401(k) plans are treated in bankruptcy A. There is a big Traditional (defined-benefit) pension plans are usually protectefd by a federal entityu calledthe , which insures pension benefits for retirees on a sliding scale. On the other 401(k) (defined-contribution) plans are not insured. Instead, plans are regulated by the Employere Retirement Income SecurityAct (ERISA).
If an employerd files for bankruptcy while stilplowing 401(k) contributions, a claim should be filed in the bankruptcy proceeding. Q. What steps can an employew take to minimize their losses on thisfront A. Be pro-active, ask lots of and keep good records. Talk to your health and retirement plan administrators as earlyas possible, and obtain copies of all plan documents. Be awared that bankruptcy proceedings involve manycomplicated deadlines. Deadline may also differ depending on the type ofbankruptcty proceeding, and they will begin to run the moment your employed files for bankruptcy protection.
If you fail to take action withimn a prescribedtime period, you may be permanently and adversely If you have specific concerns or questionds about legal rights after an employere files for bankruptcy, you should consulr with a bankruptcy attorney. Q. Does Texas have specifif bankruptcy rules/exemptions that affect these situations? A. The Bankruptcy Code and Bankruptcu Rules of Procedure are federalin nature. They do not chang from state to state, and Texas does not have its own set ofbankruptc rules. In some circumstances, state law is applied to determind propertyexemptions (e.g. homestead protection).
the laws governing employee like COBRAand ERISA, are federa l in nature and remain the same throughout the