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Chapter 11 And Unemployment Benefits

The economic downturn of 2008 had dramatic impacts on the financial stability of individuals and businesses across America. The Neenah Foundry Company was among the businesses impacted. The Foundry began pursuing protection under Chapter 11 of the Bankruptcy Code as well as laying off a portion of its workforce. Under Wisconsin law, the rate of contribution that an employer pays for unemployment insurance increases when adverse events occur that impact the businesses strength.

As Neenah Foundry approached bankruptcy, its rates of contribution were increased in accordance with the law. The Foundry sought to mitigate the impact of these increases by arguing that the reorganization that it went through as part of the Chapter 11 process had created a new company that deserved the lower rate of contribution that new businesses enjoy for an initial period after formation. 

 

The Foundry's argument was rejected by the Labor and Industry Review Commission (LIRC). The Foundry appealed that decision in state court and lost. The court found that the Foundry was essentially the same commercial enterprise based largely on the fact that the management of the business remained in the same hands. The court found changes to the Board of Directors and executive positions did not create a new business. This left the Foundry facing substantially higher unemployment contributions. 

If your business is facing a difficult debt situation and you want to understand exactly how the bankruptcy process can benefit you, the best choice is to discuss your situation with an skilled bankruptcy attorney who has significant business bankruptcy experience.

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