If you are like many people who are facing a mountain of debt, struggling financially, and considering bankruptcy, you may also be worried that filing for bankruptcy will affect your current and future employment.

How Bankruptcy Can Affect Your Current Job

When thinking about bankruptcy and employment, you must consider it from two different viewpoints: your current job and future jobs you may apply for.  Let’s begin with how bankruptcy can affect your current job.

Your Employer Can Not Fire You Because of Bankruptcy

That is right.  Your employer can not fire you because you filed for bankruptcy.  Federal law protects individuals who file bankruptcy from discrimination from their current employers.

Your Employer Can Not Punish You Either

Many potential bankruptcy filers will breathe a sigh of relief after reading those statements.  Still, the law takes it a step further by protecting you against retaliation or adverse action from your current employer because of a bankruptcy filing.

In other words, your current employer cannot carry out any of the following actions just because you filed for bankruptcy:

• Reduce your salary or hourly rate of pay.
• Reduce or take away specific job responsibilities.
• Demote you or change your job title.
• Otherwise, create a hostile work environment.

What to Do if Your Employer Does Retaliate to Your Bankruptcy Filing

It is a sad truth, but despite what the law says, some employers will terminate or retaliate against employees who file for bankruptcy.  While rare, you must know what type of recourse would be open to you if this happens.

Suppose your employer were to fire, demote or otherwise violate the law by discriminating against you because of your bankruptcy.  In that case, you may be able to file a lawsuit against your employer. 

Such lawsuits generally seek compensation for your lost income, reinstatement to a former position, or similar payments for the damages you suffered due to workplace discrimination.

While it is true that your employer cannot fire or retaliate against you solely based on your bankruptcy filing, if your employer were to state instead you are being fired based on chronic absenteeism or being late for work, inadequate job performance, misconduct, etc., then a lawsuit against them may not be possible.

A qualified workplace discrimination lawyer can help you understand your options in such a situation.

Will Your Employer Find Out About Your Bankruptcy?

Your current employer will likely never know about your bankruptcy.  You are not required to tell them about it, and while bankruptcies are public records, locating them and seeing them is often tricky and can even cost your employer some money.  In most instances, they are not going to look for bankruptcy on a current employee’s record.

However, a few situations will tell your employer that you have filed for bankruptcy.  For example, if your employer is currently garnishing your wages due to a court order, they will receive a notice to stop the garnishment after you file bankruptcy.  This will be a clear indication to your employer that you have filed.

In a case such as this, remember the wage garnishment order has already made your employer aware that you are under financial stress.  If anything, filing for bankruptcy will demonstrate your desire and commitment to reach calmer financial waters.

Similarly, what if you owe money to your employer due to an issue such as a salary, wage overpayment, or company loan.  In that case, they will likely find out about your bankruptcy if that debt is included in the obligations to be discharged under a Chapter 7 bankruptcy or a repayment plan under a Chapter 13 bankruptcy.

How Bankruptcy Can Affect Future Jobs

Will your bankruptcy filing affect your current job? Most likely not, but will it affect your ability to get jobs in the future?  It might, but there are a lot of factors to consider here.

Background Checks Will Show Your Bankruptcy

Your bankruptcy filing will become a public record.  That means anyone – employers included – can locate and see it IF they look for it.  While most people and current employers will not look for bankruptcy on your record, future employers who perform background checks on job applicants will almost certainly see a past bankruptcy filing on your record.

Government Jobs Can Not Discriminate Because of Bankruptcy

If the future employer who sees your past bankruptcy is a part of any branch of the government, they cannot discriminate against you by denying you the job based on your bankruptcy status.  That is a part of the federal law that protects filers against discrimination.

However, it is essential to remember that while a government employer cannot deny you a job based on your past bankruptcy, they can still deny you a job for various reasons that would not qualify as discrimination.  

Private Employers Can

Private employers are entirely another matter.  They cannot fire you for filing bankruptcy, but they can choose not to hire you because of a past bankruptcy filing.

In today’s hiring market, private employers tend to run a credit check on job candidates, and since they need your permission to run a credit check, you may think denying them authorization is your best course of action.

It is true that they would not find out about the bankruptcy filing that way, but they could still choose not to hire you because you refused to authorize a credit check.  Your refusal could leave the employer thinking you might be deceitful and have something to hide.

A Past Bankruptcy Is Not Automatically a Bad Thing

While private employers can choose not to hire you because of a past bankruptcy, that does not mean they automatically will not hire you because of your bankruptcy filing.  Many employers do not care or will see bankruptcy as a financially responsible step toward securing your future.

There will be some employers that will care, though.  This is particularly true for jobs that involve finances or money handling.  Sometimes, it can be helpful to be upfront with potential employers about your bankruptcy if you are worried about them finding out.  Telling them about it before they come across it on your credit check can show honesty, and explaining what you learned from the experience can show maturity.

Bankruptcy and Security Clearance

A security clearance may be required to obtain and hold some jobs with government agencies or private government contractors.  They can be difficult to get, and once you get it, you want to hold onto it.  But will filing for bankruptcy affect your security clearance?

In most cases, the answer is no.  The thinking behind this question usually centers on debt – if you have a lot of debt, you may be easier to blackmail or bribe, and an individual who is being blackmailed or might be susceptible to bribery should not have access to sensitive government information.  

But think about what filing bankruptcy means.  You have discharged your debts or have a concrete and manageable plan for repaying them.  That makes you less likely to submit to blackmail or a bribe.  It could actually have a positive effect when it comes to your security clearance.

Bankruptcy and Professional Licenses

Jobs that require you to hold a professional license may present unique challenges when it comes to bankruptcy.  You may be required to report filing bankruptcy to your employer.  This is usually only an issue with jobs in the financial industry.  Still, in any case, if you are required to report bankruptcy to a professional licensing board and fail to do so, you may be subject to the loss of your professional license.  Without your license, you will most likely not be able to continue to do your current job, and your employer will have no choice but to fire you.

However, this is an extremely rare circumstance.  For the most part, you can file bankruptcy and retain your professional license, meaning there is no risk to your current employment status.  If you are still concerned about this particular point, it is always a good idea to speak with an experienced bankruptcy attorney.

Worried About Bankruptcy and Employment? Call a Bankruptcy Lawyer

Will bankruptcy affect your job?  It might affect future job prospects and, in rare cases, your current employment.  But the benefits of bankruptcy almost always outweigh the relatively minor risks to employment status.

Still, everyone’s situation is unique.  That is why it is essential to speak with a trusted bankruptcy attorney. 

At The Alliance Legal Group, PLLC, our team of knowledgeable and experienced attorneys is ready to help you understand your options and fight for you as you push forward to a new and brighter financial future.

Ready to get started?  Reach out today.  Call us at (757) 923-4357 or contact us online to schedule a free, no-obligation consultation.  Do not let debt or fear ruin your life.

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