Can Bankruptcy Affect My Employment?

Filing for bankruptcy is a very personal decision, and something that a lot of people would prefer to keep private. Unfortunately, there are certain notifications that accompany your filing, and in some cases that may include your employer. Though it is against the law for either private or government employers to terminate, demote, cut salary or take any other negative action against an employee based on a bankruptcy filing, that doesn’t eliminate some potential ramifications. Let’s take a look at how an employer can learn about your bankruptcy, and the possible impact.

Filing for bankruptcy does not automatically trigger notification to an employer unless you have a wage garnishment that needs to be stopped or you have a debt to your employer that you included on your bankruptcy paperwork. There is also a possibility that filing for a Chapter 13 bankruptcy would trigger a notification to your employer so that a portion of your wages can be automatically sent to the bankruptcy court as part of your repayment plan.

The good news is that most employers will view a bankruptcy filing in a positive light, as they will see it as a signal that you are getting your financial house in order and will be alleviated of some of your economic stress. That is especially true in jobs that require a security clearance, as an employee struggling with debt represents a significant risk of blackmail.

There are other issues surrounding applying for a job after having filed for bankruptcy. When you apply for a job, many employers ask you to consent to them running a credit check. Though you can say no, they have the right to reject your application for employment on this basis. Government employers including local, state and federal agencies are not permitted to use a bankruptcy filing as a factor against hiring you, the same is not true of private employers. While a company would be wise to view your bankruptcy filing as an indicator that you have shown maturity and responsibility by taking charge of your financial situation and getting yourself out of debt, some employers may be hesitant about hiring an individual with a history of money troubles — and this is particularly true if the position that you are seeking has anything to do with managing funds.  If you apply to a job and you are concerned about them finding out about your bankruptcy filing, it may be a good idea to include the information in your interview so that you have the chance to explain what happened and use the steps you’ve taken as an indication of your positive attributes.

Still curious about the effects of bankruptcy? Contact our experienced bankruptcy attorneys today!