What Happens to a Workers’ Comp Claim After an Employer Files Bankruptcy?

Recovering from a work-related injury is stressful. Workers’ compensation benefits can help ease the stress, at least financially. For example, Adam had to stay off work for several months while the injuries he received at his construction site healed. Then he got the bad news – his employer had just filed bankruptcy. Now Adam had the new worry of what would happen to his workers’ comp claim.

How a Workers’ Comp Claim Is Paid

By law, most Illinois employers are required to provide workers’ compensation insurance to their employees. Workers who suffer on-the-job injuries receive benefits from the insurer, including:

  • Payment for necessary medical treatment, and
  • Payment for wages lost while the employee is off work.

Benefits typically continue until the worker is well enough to return to work. With permanent disability, the worker may receive payments for many years.

When an employer files for bankruptcy while a claim is pending, will the claim still be paid?

Bankruptcy and Your Workers’ Comp Claim

Injuries that occurred while the employer’s insurance was in place should still be covered by the insurance. This is true even when the company that purchased the insurance is no longer in business or is stuck in bankruptcy limbo.

However, in some cases, a temporary stay may be placed on workers’ comp payments. If this happens, your attorney may have to go to court to have the stay lifted.

In Illinois, some companies may be “self-insured.” This means that the company does not purchase insurance, but essentially insures itself. Even if you work for this type of employer, safeguards should be in place to protect your benefits.

Finally, what if the insurance company itself goes into bankruptcy? After a short time, the Illinois Insurance Guaranty Fund (IIGF) should step in. The IIGR was founded in 1971 to protect people with insurance claims from the effect of their insurer going bankrupt.

Talk to Us About Your Workers’ Comp Claim

You may be uncertain how to proceed after an employer files bankruptcy. Also, workers’ compensation law can be complicated. It helps to have an experienced workers’ comp lawyer on your side.

Talk to Osvaldo Rodriguez for an honest assessment of your case. To schedule your free initial consultation, or just ask a question, call us at 708-716-3441 or fill out the form on the Contact Us page.

At Osvaldo Rodriguez, P.C., we represent clients throughout the state of Illinois, including Chicago, Addison, Bellwood, Bensenville, Berwyn, Chicago, Cicero, Elmwood Park, Franklin Park, Maywood, Melrose Park, Northlake, and all of Cook County, Lake County, Kane County, Dupage County, and Will County.

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