Will My Employer Know if I’ve Filed for Bankruptcy?

There is no shame in filing for bankruptcy: Filing is completely legal, and the need for a fresh start is driven by a wide range of circumstances. Still, bankruptcy has an unfortunate negative connotation that leads many individuals to concerns about word getting out to employers and others. There are definitely circumstances under which employers are notified of a worker’s bankruptcy filing, but if you don’t fall into one of these specific categories, there is no reason for your employer to know of your filing.

The first thing you need to understand is that anybody can find out about a bankruptcy filing if they really want to. Bankruptcies are public record, which means that if somebody suspects that you’ve filed and want to learn more, they can do so. If your concerns about your employer discovering your bankruptcy filing center on your job security, there is no need to worry. It is illegal for a company to fire an employee for filing for bankruptcy, and if they do so you are able to take legal action against them.

The circumstances under which your employer would be notified of your bankruptcy filing are limited to three situations: If your wages were previously subject to garnishment; if your employer is listed as one of your creditors on your bankruptcy filing; or if your bankruptcy is filed under Chapter 13 and requires a payroll deduction for automated payments.

  • Wage garnishment – When someone you owe money takes legal collection action, it frequently results in a wage garnishment – especially if you never responded to their suit. Many people end up filing for bankruptcy under these circumstances, as the garnishment leads to being unable to pay bills. Filing for bankruptcy stops the garnishment, but your payroll department will receive notification of the stop order, just as it received notification of the garnishment.
  • When your employer is a creditor – If you owe money to your employer, they will receive the same notification of your bankruptcy filing as others you have listed as creditors.
  • Chapter 13 bankruptcy – Under Chapter 13 you are required to agree to a monthly repayment plan rather than simply having your debts discharged. These plans are frequently processed through payroll deduction, in which case your payroll department will receive instructions as to the disbursement of funds.

One important point regarding employer notification: If you apply for a new job, the company to which you apply may run a credit report on you as part of your application. In some circumstances, this may impact your ability to be hired.

For more information about the complexities of bankruptcy, contact the experienced bankruptcy attorneys at Jensen Bagnato today!