A lot of people are hesitant to seek bankruptcy protection. The reason is clear: there are a lot of misconceptions about the bankruptcy process and what it means for your future. As we’ve discussed previously on the blog, though, these misconceptions can be easily put to rest.
For example, bankruptcy exemptions can provide you with firm financial footing as you start the next chapter of your life, and diligent efforts can rebuild your credit score. But another concern of many potential bankruptcy filers is how pursuing the process will affect their employment.
Will bankruptcy negatively impact your employment?
Probably not. After all, there really isn’t a mechanism in place for your current employer to even find out that you’ve filed for bankruptcy, and they’re not automatically notified that you’ve filed. Although a bankruptcy can show on your credit report, your current employer probably isn’t going to randomly pull your credit report.
And even if they do, the Bankruptcy Code prohibits employers from discriminating against workers who have filed for bankruptcy protection. This means that your employer can’t demote you, reassign you, take away job duties, or terminate your employment simply because you filed for bankruptcy.
Will your bankruptcy filing prevent you from securing new employment?
Maybe, but it’s unlikely. Federal law prevents federal employers from discriminating against applicants based on a history of pursuing bankruptcy, so if you want to work for the federal government, then your bankruptcy shouldn’t come into play at all. The same holds true for local and state governments.
While there’s no similar protection pertaining to private employers, discrimination based on a history of bankruptcy doesn’t appear to be common. Your prior bankruptcy might come into play if you apply for a position that involves money management, but even then, you might have the opportunity to explain your circumstances during an interview.
What can you do if you feel like you were treated unfairly because of your bankruptcy?
If you think that you were discriminated against or otherwise treated unfairly because of your bankruptcy history, then you can file a complaint against your employer by reaching out to the Equal Employment Opportunity Commission. You can also contact the state equivalent.
You can also consider taking legal action against your employer. All of that is to say that you have remedial avenues if your employer breaks the law in their treatment of you. Therefore, you shouldn’t let your employment fears prevent you from advocating for the debt relief that you need.
Are there any instances when your employer will be notified of a bankruptcy filing?
Yes, but only in limited circumstances, primarily related to a Chapter 13 petition. Here, if you owe your employer money or if you’ll be making your debt payments through a payroll deduction or wage garnishment, then your employer is likely to find out about your bankruptcy.
However, as mentioned above, your employer won’t be able to take negative employment actions against you based on your filing.
Don’t be scared away from the benefits of bankruptcy
There’s a lot of false information out there about what the bankruptcy process entails. Don’t be fooled by it. Do your own homework to learn what the process can do for you and your family, that way you can make the informed decision that’s right for you.
If you have any lingering questions about the process, then be sure to discuss them with your attorney so that you can confidently and competently move forward with the process when you’re ready to do so.