Here it works like this (in my own layman terms): once you file for bankruptcy you'll have someone assigned to handle your company's business and this person's

Here it works like this (in my own layman terms): once you file for bankruptcy you'll have someone assigned to handle your company's business and this person's duty is to find out whether the company is just suffering from temporary cash flow problems and business could potentially continue or if it is all hopeless. In the former case, an agreement with all creditors will be reached to write off x% so that the company can continue eventually - in the latter case, all money that can be squeezed out of the company will go to said creditors but of course they would still lose potentially most of their money but they can then write it off on taxes and it is considered a normal business risk. Also there are certain rankings and priorities for this distribution of what was left - social insurance and health care rank highest, they are also the ones that will HAVE you shut down first if you are late on payments, they will literally write to your customers(!!!) and tell them to send any payments to the insurances instead of to your company because you haven't paid your dues. This is also when your customers will freak out that you will go bankrupt and will very likely stop paying anything until they are being forced to in the bankruptcy process. So as a company just scraping by and hoping to make it SOMEHOW, at that moment you are frakked because you won't have a single euro coming in and anything that would come in will instantly go to social insurance and health care. No more cash flow and if you do not declare bankruptcy right then and there, you as the CEO can get into serious legal trouble. Next in the ranking then come the other creditors with certain priorities and also employees but they are pretty much last so most of the time, they won't be getting all of their owed salaries out of the bankruptcy assets; and that's where the federal employment office and a government run fund will step up and pay you. Oh and you won't be losing your health care either, it will all be taken care of and until you find a new job you will receive unemployment money (let's say 80% or so of your former salary). I had to go through the whole process after working a few years in a sweet startup and it really, really broke my heart to not be working with those guys anymore but it was also an extremely valuable lesson in "politics", learning to read management-speak in a situation like that and knowing which possibilities you as an employee have. And I was also very thankful for all the social security available to me as a citizen - I pay my taxes a lot happier now.