As our clients begin to realize the benefits of filing for bankruptcy, and the financial relief it will bring them, one of the first things they want to know is if their employer will find out. Some people even worry that they could be fired if their boss were to learn of their bankruptcy. While many myths about bankruptcy persist including the notion that everyone will find out about your bankruptcy, the truth is that your bankruptcy will not affect your employment, and in many cases employers will never find out.
Title 11 of the United State Bankruptcy Code 11 USC § 525 (b) explicitly prohibits discriminatory treatment from an employer, “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 or bankrupt…” This is another example of how the bankruptcy laws have been designed to help protect citizens from financial ruin, not punish them. Bankruptcy laws guarantee your chance at a fresh start and are therefore intended to protect your employment during and after the bankruptcy process.
While your bankruptcy discharge is a matter of public record, chances are your employer will never find out if you file for a Chapter 7 bankruptcy. Now it may be that your wages are already being garnished. If this is the case then your Chapter 7 discharge will actually stop the garnishment and for this to happen your employer would be notified. Your employer will learn of your bankruptcy but will likely see this as a good thing. Considering your employer is already aware of your financial trouble because of the garnishments in the first place they will usually view your filing for bankruptcy as a positive step towards your financial recovery.
Unlike a Chapter 7, a Chapter 13 on the other hand sometimes requires you to notify your employer of your bankruptcy. Chapter 13 bankruptcies include a detailed repayment plan where you will repay a percentage of your debt back to your creditors. This repayment plan is monitored by the bankruptcy trustee, and you may choose to arrange for these repayments to be automatically deducted from your earnings. This is usually the extent of your employer’s involvement for a Chapter 13 filing unless you owe them money in some way through unpaid advances, expenses or maybe even a 401K for example. If this is the case then your employer will also be listed as a creditor in your bankruptcy so we would advise you to talk to your boss before filing for bankruptcy to avoid any unnecessary conflict.
Nevertheless, bankruptcy protection is your legal right. If your employer terminates you, harasses you, demotes you or reduces your salary upon hearing of your bankruptcy discharge then you may have legal recourse. Unless your employer can demonstrate a good reason in the eyes of the court for your termination then you may have a case for discrimination based on your bankruptcy. At the end of the day your employer should not treat you any differently because of your bankruptcy.
If you are considering bankruptcy but are concerned about how it may affect your current job, feel assured that the laws are in your favor and will help protect you against any negative fall out from your employer.
But what if you are looking for a NEW job after bankruptcy? The same section of the Bankruptcy Code that protects your current employment, 11 USC § 525 (b), gives less protection to job applicants than to existing employees. If you are applying for a government position you are fully protected from discrimination based on your bankruptcy. Private employers, on the other hand, may ask your permission to run a background check, and a credit report showing your bankruptcy can be part of that check. In practice this matters mostly for jobs in the financial field or positions with sensitive money-handling duties. Keep in mind that a credit check can only happen with your written permission, so you will always know it is coming – and many employers view a candidate who has resolved their debt through bankruptcy as more responsible than one still drowning in it. Our office is happy to help clients prepare candid answers to interview questions about a bankruptcy in the unlikely event they come up.
Get in touch with a qualified bankruptcy attorney for help. If you live in New York and have questions about bankruptcy or want to learn more about how your job will be protected when you file then contact the Law Offices of William Waldner. We offer free consultations and are committed to excellent personal communication throughout the bankruptcy process. Our Chapter 7 cases have a discharge rate of over 99%. Please call 212-244-2882 to arrange a free bankruptcy consultation today.
This article is intended for educational purposes only. By reading this article no attorney-client relationship has been created.
