Will Bankruptcy Affect My Employment?

“Will bankruptcy affect my job?”  We are frequently asked this question at our office.  Will bankruptcy affect your employment?   The answer is usually “No.”  Bankruptcy will NOT usually affect your job in any way – except for rare job-type exceptions.

You cannot fire someone because they filed for bankruptcy because it is considered illegal discrimination.  The only exceptions to this rule are jobs that require you to manage financial information or certain upper-level security positions.  These “exception” situations are rare and never come up in the vast majority of bankruptcy filings.

Bankruptcy can actually have the opposite effect on your employer: it may increase your chances of either getting a new job or retaining an existing job.  Employers do not want their employees to be stressed or even a security threat because they have too many debts.  Chapter 7 bankruptcy eliminates your debt and Chapter 13 reorganizes it.  Therefore, a bankruptcy filing eliminates financial dilemmas employers prefer to not have present within their ranks.

Many states still allow credit checks to be preformed before hiring an employee.   Still, bankruptcy will likely not have a strong bearing in these situations.  Bankruptcy many times improves your credit.  It also always eliminates your debts.   Therefore, your credit or overall debt situation could likely improve from filing bankruptcy.  Once again, in certain finance-type jobs, employers are still legally able to discriminate because you filed for bankruptcy.  These financial-based jobs propositions are among the rare exceptions.  They are not the rule.

In practical application, bankruptcy virtually never affects employment. It’s simply illegal and undesirable.  Of course, not all employers follow the laws, but this is rare.    These situations are so rare, that our office has never witnessed them among the thousands of cases that we have filed.  What we usually witness is employers taking bankruptcy filings very seriously. Employers even make special accommodations to help with their employees’ debt matters.   We have witness multiple employers strongly recommending that their employee file bankruptcy to get much needed relief.    Bankruptcy – even among employers – simply no longer retains its traditional stigma: it is usually viewed as a positive, much-needed step toward financial recovery.

Image of woman on phone with a creditor