Can Bankruptcy Affect My Employment?

One of the biggest considerations people considering bankruptcy wrestle with is how their filing will impact their day-to-day lives. As much as people are concerned about the long-standing taboo that exists against bankruptcy, the truth is that there’s no reason for most people who you come into contact with to even know that you’ve filed: unless you share the news yourself, the information is largely restricted to your creditors. This is true of your social circle and family, and in most cases, it is true of your employer as well. There is no reason why a bankruptcy filing would affect your employment, and if your employer does learn of your situation and then uses it against you, you are entitled to take legal action against them.

There are very few instances where an employer will learn of a bankruptcy filing. The only exception to this rule is if a Chapter 7 bankruptcy follows a creditor suing you and obtaining a wage garnishment — in this case, the garnishment will be canceled — or if you file for a Chapter 13 plan and the judge orders your planned payments to be automatically deducted from your wages. In either case, no matter whether your employer is a public company, a private company, or a government agency, they are not permitted to use this development as a reason to demote you, cut your wages, terminate you, or in any other way change the terms and conditions of your employment. That does not mean that they can’t fire you for other things: if you steal, lie, are not performing up to par, or if they have a layoff, they are still permitted to treat you as an at-will employee.

If, however, you are considering applying for a new job now or at some time in the future, you do need to be aware that your bankruptcy will appear on the credit check that almost every employer runs on their prospective employees. Though federal, state, and local agencies are not permitted to use a previous bankruptcy filing as grounds for rejecting a job applicant, private employers have the right to do so, and many do. This is particularly true if you are being considered for a position that involves handling money.

There is no doubt that filing for bankruptcy represents a very big step that requires a thoughtful decision-making process. For experienced, knowledgeable guidance as you consider your options, contact our bankruptcy law firm today.