How Filing for Bankruptcy Can Affect My Job Status and Future Employment?

We live in an age of diminishing privacy. Today more than ever, businesses are keeping tabs on their employees’ criminal histories and credit scores — so can filing for bankruptcy get you fired? Or, if you aren’t currently working, what about your prospective employer? Does having a bankruptcy on your record hurt your chances of being hired in the future?

Can I Get Fired From My Job if I File for Bankruptcy?

For those who are currently employed: can bankruptcy cause you be fired from a job you already hold?

The short answer to this question is, no.

See the terms of 11 U.S. Code § 525(b), which states:

“No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor…”

You may be fired for other reasons while you happen to be undergoing a bankruptcy, but the bankruptcy itself is not legal cause for job termination within private companies.

However, if you file under Chapter 13, the associated reorganization plan — which generally includes garnishment toward your debts — will probably become known to your employer  (or at the very least, the payroll department).  Nonetheless, you have little to fear: you are protected by federal law.

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Applying for a Job After Filing for Bankruptcy

For those who are planning on becoming employed: can bankruptcy prevent you from being hired in the future?

There are many strict anti-discrimination laws which protect the rights of employed and job-seeking persons in the United States.  Unfortunately, employers have found a tricky loophole which can, realistically, cause problems for job-hunters.  While disregarding a potential hire explicitly because of bankruptcy is illegal, some employers may reject an applicant because of bad credit — which is typically part and parcel of bankruptcy.

The Equal Employment Opportunity Commission tends to frown on irrelevant credit checks (i.e. checks into applicants who are not seeking work in finance) because they are associated with racial profiling.  Nonetheless, background checks are increasingly common.  It’s highly likely that you will be screened based on your credit, so you need to be prepared for the tough questions that will probably follow.

Lying is never, never a good idea.  You will be found out eventually and penalized accordingly.  It is a better strategy to be honest and forthcoming about your bankruptcy if you are asked.  Emphasize the positive aspects of the experience.  For example, you can talk about being proactive and taking charge of an unsatisfactory situation in your life.  You could talk about working hard to steadily improve your credit.  You could also touch on the financial responsibility you learned, and how you see your mistakes as an opportunity for improvement.

The good news is, you won’t be surprised with a credit check out of the blue: you’ll have to sign your permission first.  (There are some instances where authorization is not required, such as obtaining a grant from the government or having power of attorney, but these situations are unlikely within the context of employment.)

Call a Pennsylvania Bankruptcy Lawyer Today

If you or a loved one is considering Chapter 7 or Chapter 13, call the law offices of Young, Marr & Associates at (215) 701-6519 in Pennsylvania to schedule your free, confidential case evaluation with one of our bankruptcy lawyers.

Have You:

Been paying credit card balances that seem to never go down?

Lost your job and are now having trouble keeping up?

Attempted to work out a payment arrangement to no avail?

Been notified of a mortgage foreclosure action?

Been denied for a mortgage or other line of credit?

If the answer to any of these questions is “yes” then bankruptcy may be an option that you should consider.

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