Bankruptcy in Luxembourg is a legal procedure that concerns both employers and employees. Whether you are a company director or an affected employee, it is essential to know your rights, obligations, and the steps to take in the event of insolvency.
What is bankruptcy in Luxembourg?
Bankruptcy is declared when a company or trader is unable to pay its debts. In Luxembourg, it must be declared before the competent court within one month of the suspension of payments.
The purpose of this procedure is to protect creditors, employees, and to ensure a transparent liquidation process.
Consequences of bankruptcy for employees
When an employer is declared bankrupt, the employment contract ends immediately. However, several protections exist:
- Guaranteed payment: salary of the month of bankruptcy and the following month, as well as partial severance pay (under certain conditions).
- Access to unemployment benefits via ADEM.
- Priority claim for wages of the last 6 months, as well as compensation related to the termination of the contract.
Obligations and procedures for employers
When a company can no longer pay its debts, the director must file a declaration of insolvency with the court within one month.
Luxembourg also offers measures to support companies in difficulty:
- Specialist advice and guidance.
- Access to certain financing.
- Reorganization procedures to avoid bankruptcy.
In cases of mismanagement, the director’s liability may be engaged. It is therefore strongly advised to consult legal professionals and support organizations.
Alternatives and support
Before reaching bankruptcy, several solutions exist:
- Judicial reorganization.
- Payment plan negotiated with creditors.
- Public aid and specialized advice.
Professional support is strongly recommended to explore all options and comply with legal obligations.
See the dedicated pages on the website of our partner Frontaliers Grand Est:
For employees : Faillite au Luxembourg – Employeurs
For employers : Faillite au Luxembourg – Salariés
