What should be settled first in a bankruptcy situation: government claims or employee wages?

In a bankruptcy situation, employee wages are considered a priority over government claims. This prioritization is grounded in the recognition of the employee's contribution to the organization and the need to ensure their livelihood, particularly in difficult financial situations. Employees often depend on their wages for basic living expenses, and thus the law generally provides them protection in these circumstances.

Furthermore, under bankruptcy law, wages that are owed to employees typically fall within a specific priority class, often ranking above many types of unsecured debts, including general claims made by government entities. This emphasis on protecting employee wages highlights the importance of a stable workforce and maintaining morale, even in times of financial distress.

While government claims are indeed important and need to be eventually settled, the legal framework tends to prioritize employee wages to ensure that workers receive compensation first, enabling them to manage their financial obligations, thereby stabilizing their personal economic situations.