When you’re struggling with financial problems, the last thing you need is trouble getting or keeping a job. But if you’re like many people who are considering bankruptcy, you may be worried that filing bankruptcy will affect your employment.
Will filing for bankruptcy affect your job? The answer is somewhat complicated and depends on a variety of factors. In the article below, we examine what you need to know about this subject, but it’s often best to discuss concerns about bankruptcy and employment with an experienced bankruptcy attorney.
At A Bankruptcy Law Firm, LLC, our experienced Illinois and Missouri bankruptcy lawyers are ready to help you understand your bankruptcy options and the precise impacts filing bankruptcy can have on your job and many other parts of your life. Read on to learn more, or reach out today to claim your free consultation with a bankruptcy lawyer.
How Bankruptcy Can Affect Your Current Job
In thinking about bankruptcy and employment, you have to consider it from two perspectives: your current job and future jobs you may apply for. We’ll begin with how bankruptcy can affect your current job.
Your Employer Can’t Fire You Because of Bankruptcy
Let’s get this out of the way immediately: Your employer can’t fire you because you filed for bankruptcy. In fact, federal law protects those who file bankruptcy from discrimination from their current employers.
Employers Can’t Punish You Either
That should spark a sigh of relief for many potential bankruptcy filers, but the law takes it a step further by protecting you against any sort of retaliation or negative action because of a bankruptcy filing.
That means your current employer can’t do the following because you filed for bankruptcy:
- Reduce your salary
- Take away certain job responsibilities
- Demote you or change your job title
- Otherwise create a hostile work environment
What to Do if Your Employer Retaliates for Bankruptcy
The sad truth is that some employers will terminate or retaliate against employees who file bankruptcy — despite what the law says. This is rare, but if it were to happen to you, what would your recourse be?
If your employer fires, demotes, or otherwise violates the law by discriminating against you because of your bankruptcy, you may be able to file a lawsuit against your employer. Such lawsuits may seek compensation for your lost income, reinstatement to a former position, or similar payments for the damages you suffered because of the workplace discrimination.
However, you need to keep in mind that your employer is prohibited from firing or retaliating against you only because of your bankruptcy. If your employer says they are firing you based on something else, such as being late for work or inadequate job performance, a lawsuit against them may not be viable.
A qualified workplace discrimination lawyer can help you understand your options if you find yourself in such a situation.
Will Your Employer Find Out About Your Bankruptcy?
Here’s the thing: Your current employer will likely never know about your bankruptcy. You’re not required to tell them about it, and although bankruptcies are public record, the process for seeing them is often difficult and can even cost some money. They’re probably not going to go looking for a bankruptcy on a current employee’s record.
However, a few situations will tell your employer that you have filed bankruptcy. For example, if your employer is currently garnishing your wages because of a court order, they will receive a notice to stop garnishing your wages after you file bankruptcy. That is a clear indication that you have filed.
In a case like this, it’s helpful to remember that your employer is already aware that you are under financial stress because your wages are being garnished. If anything, filing for bankruptcy will demonstrate your commitment to reaching calmer financial waters.
Similarly, if you owe money to your employer because of an issue like overpayment, they will likely find out about your bankruptcy if that debt is included in the debts to be discharged under a Chapter 7 bankruptcy or a repayment plan under a Chapter 13 bankruptcy.
How Bankruptcy Can Affect Future Jobs
Will filing for bankruptcy affect your current job? Probably 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. Read on to learn more.
Background Checks Will Show Your Bankruptcy
When you file bankruptcy, that’s public record. That means anyone — employers included — can see it. Most people and employers are not going to go looking for a bankruptcy on your record, but employers who background check job applicants will almost certainly see a past bankruptcy filing on your record.
Government Jobs Can’t Discriminate Because of Bankruptcy
If the employer who sees your past bankruptcy is a part of any branch of the government, they can’t discriminate against you by denying you the job based on your bankruptcy status. That’s a part of the federal law that protects filers against discrimination.
However, it’s important to keep in mind that this simply means a government employer can’t deny you a job based on your past bankruptcy. They can still deny you the job for a wide variety of other reasons that wouldn’t qualify as discrimination. Simply having a bankruptcy on your record doesn’t mean you automatically get every government job you apply for.
But Private Employers Can
Private employers are another matter entirely. They can’t fire you for filing bankruptcy, but they can certainly choose not to hire you because of a past bankruptcy filing.
Many private employers will see your past bankruptcy when they run a credit check on you. They need permission from you to run a credit check on you, so you may think you’ll just say they can’t do the credit check so they will never find out about your bankruptcy.
It’s true that they wouldn’t find out about the bankruptcy that way, but they could still choose not to hire you because you refused to authorize them to run a credit check.
A Past Bankruptcy Isn’t Automatically a Bad Thing
While private employers can choose not to hire you because of a past bankruptcy, that doesn’t mean they automatically won’t hire you because of your bankruptcy filing. In fact, many employers don’t care at all or will see bankruptcy as a financially responsible step toward securing your future.
Some employers will care, though. That’s particularly true for jobs that involve finances or money handling. Sometimes, it can be helpful to be up front with potential employers about your bankruptcy if you’re worried about them finding out. Telling them about it before they find out can show honesty, and explaining what you learned from the experience can show maturity.
Bankruptcy and Security Clearance
Some jobs with government agencies or private government contractors require security clearance. This clearance is essential to your ability to hold particular jobs, and it can be tough to get it. Once you get it, you want to hold onto it. But will filing 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. And someone who is being blackmailed shouldn’t have access to sensitive government information.
But think about what bankruptcy actually means: You have discharged your debts or have a concrete, manageable plan for repaying them. If anything, that makes it less likely that you would submit to blackmail. So, a bankruptcy 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. That’s because you may be required to report filing bankruptcy to your employer.
This is usually only an issue with jobs in the financial industry, but in any case, if you are required to report a bankruptcy to a professional licensing board and fail to do so, you may lose your professional license. Without that license, you may no longer be able to do your current job, and your employer will have no choice but to fire you.
However, this is a highly rare circumstance. For the most part, you can file bankruptcy and retain your professional licenses, meaning there is no risk to your current employment status. If you are concerned about this particular point, it’s 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’s why it’s essential to speak with a trusted bankruptcy attorney. At A Bankruptcy Law Firm, LLC, our team of experienced Missouri and Illinois bankruptcy lawyers is ready to help you understand your options and fight for you as you push forward to a brighter financial future.