Will Bankruptcy Affect My Employment?

When you are struggling with financial challenges, the last thing you want is uncertainty over your employment. If you are let go from your current position, it will only make things more challenging. A common question about filing for bankruptcy is how it will impact their current employment and future job prospects.

The answer to this question depends on several factors. Let’s explore the relationship between bankruptcy and employment to better understand the impact of bankruptcy on employment and how your rights under the Fair Credit Reporting Act (FCRA) can protect you from employer discrimination.

Different Types of Bankruptcies

Bankruptcy is designed to provide individuals or businesses experiencing financial difficulties with a fresh start. There are two types of bankruptcy — Chapter 7 and Chapter 13. While Chapter 7 is mainly focused on discharging unsecured debt, such as credit card or medical bills, Chapter 13 is more about catching up on secured debts like home loans. You can consult with a bankruptcy lawyer to decide which type of bankruptcy suits your financial situation.

Discrimination Laws For Employees Who File Bankruptcy

Under bankruptcy law, an employer cannot fire you solely for filing for bankruptcy protection. That would be considered discrimination. Also, the employer can not use bankruptcy filing as a reason to change your employment terms. They can’t change your salary or take away your job responsibilities solely because you filed for bankruptcy.

If you can prove that your employer fired you because you filed for bankruptcy, you would have a strong case for illegal discrimination by an employer. You can also report them to the Equal Employment Opportunity Commission (EEOC). However, if the employer can prove there are other reasons for firing or demoting you, such as incompetence or dishonesty, your case becomes weaker.

Certain positions or industries could be more sensitive to cases where an employee has filed for bankruptcy. For example, certain high-level positions with financial responsibility would be sensitive to such matters. In some cases, the employer could have specific policies or contractual agreements that specify the course of action if an employee files for bankruptcy. You must carefully review your employment contract to determine if any such policy or agreement exists.

Bankruptcy Filing From Employer’s Perspective

While your current employment status should not be affected by filing for bankruptcy, you could face some challenges for future job prospects, especially for senior-level roles in finance or positions that require security clearance. Bankruptcy filings are public records, so it’s easy for a potential employer to check if a candidate has filed for bankruptcy in the past through a credit report.

Your current employer does not need to be notified of your financial status, but a bankruptcy court may order them to deduct payments from your paycheck.

Federal law prohibits government agencies from discriminating against candidates who have filed for bankruptcy. However, the laws are not so strict for private employers. They can decide not to hire you based on your history of bankruptcy.

Steps to Rebuilding Your Financial Future

Bankruptcy is not entirely a bad thing. Many potential employers will either not care or will view you as a responsible person taking steps to secure your financial future. Job applicants should be upfront with potential employers about their past bankruptcy. This shows that you are being honest and can help build trust.

The most important thing is that you don’t repeat the mistakes that led to your bankruptcy. If there are payments you need to make, keep up with the payment schedule. You should also consider talking to a financial advisor who can help you create a budget based on your financial circumstances and guide you on investment strategies to help you become financially stronger. For all your questions related to bankruptcy, get in touch with a bankruptcy attorney.

Consult with an Experienced Bankruptcy Attorney

Unfortunately, bankruptcy could be your only option to recover from your financial situation. You are not alone. There were 433,658 bankruptcies in the U.S. for the 12-month period ending on 30th Sep 2023.

To consult with an attorney about bankruptcy consequences for employment or any other aspects related to bankruptcy, contact The Parker Law Team at (410) LAW-YERS. If you feel your employer retaliated against you for filing for bankruptcy, you could sue. If you are considering filing for bankruptcy, we can guide you through the proceedings.