“If my employer has declared bankruptcy, can I still get COBRA benefits?”

Question: As of April 1, I have no health insurance. My company went “belly up,” so I guess I have no COBRA to fall back on. Do I have any options?

          Craig  
         Indianapolis, Indiana 

Answer: Craig, it all depends on what you mean by “belly up.”

COBRA permits you to continue on your employer’s health plan after you’ve lost your job, but ONLY IF that health plan is in existence.

When a company declares bankruptcy, it does so generally in one of two ways: under Chapter 7 of the United States Bankruptcy Code, or under Chapter 11 of the United States Bankruptcy Code. 

A. Chapter 7 Bankruptcy: When a company files for bankruptcy under this Chapter, it seeks to “liquidate” itself. That means the company sells all of its assets in order to pay as many of its bills as possible to its creditors, and then the company ceases to exist. If this is the Chapter your employer filed under for bankruptcy, then there is no health care plan, and you therefore have no COBRA rights.

B. Chapter 11 Bankruptcy:  When a company files for bankruptcy under this Chapter, it usually means that the company continues to operate its business under the Court’s protection while it attempts to reorganize its affairs. In many cases, health care plans continue in effect during this process.

Chances are, Craig, that you know whether your employer is still in business. If it is, contact its HR department, and ask whether the health plan remains in effect. If it does, you’re in luck. If not, then you are not.

Like I wrote above, it all depends on what you mean by “belly up.”

Hope this helps.

          Best, Al Sklover

© 2010 Alan L. Sklover, All Rights Reserved.