How Does Bankruptcy Affect Future or Current Employment?
Declaring bankruptcy can affect your finances, emotions, reputation, and, potentially, your employment. It’s illegal for an employer to terminate or refuse to hire you due to bankruptcy filings. However, they can consider your credit score and credit report in many cases when making hiring decisions.
That’s especially true for certain occupations like lawyers, financial professionals, and roles requiring security clearances. Whether you are about to file bankruptcy or are currently in the bankruptcy process, it’s essential to understand what your current or future employers can consider regarding your employment.
This article discusses the following:
- Will I Lose My Job Due To Filing Bankruptcy?
- How Do Employers Learn About An Employee’s Bankruptcy?
- Will The Bankruptcy Court Publish Your Bankruptcy Filing?
- Do Bankruptcies Show Up On Background Checks?
- How Does Bankruptcy Affect My Ability to Get A Security Clearance?
- Can You Work At A Bank If You Filed Bankruptcy?
- Can You Hide Bankruptcy on a Credit Report?
- How Can I Build Back My Credit After Bankruptcy?
By the time you’re finished reading, you’ll know how a bankruptcy discharge can affect your current and future job, your employment rights when you file bankruptcy, and how to repair your credit after bankruptcy proceedings.
If you’re considering debt consolidation, credit counseling, monthly payment negotiations, or another form of debt relief, we can help. Contact a Florida bankruptcy attorney at Ziegler Diamond Law today to discuss your debt relief options.
Continue reading to learn bankruptcy basics and how filing bankruptcy can affect your career.
Will I Lose My Job Due To Filing Bankruptcy?
The Equal Employment Opportunity Commission (EEOC) doesn’t support a blanket approach of assessing applicants based on credit history, bankruptcy protection, etc., without first considering an employee’s personal bankruptcy compared to job-relatedness.
Further, Section 525(b) of the U.S. Bankruptcy Code says that public employers are not allowed to discriminate against or terminate an employee based on a past or ongoing bankruptcy case. Additionally, an employer can’t demote you, reduce your salary, or take away professional responsibilities regardless of the type of bankruptcy filing (i.e., Chapter 7, Chapter 11, Chapter 13, etc.).
Section 525(b) only applies to public employers. In theory, private employers can refuse to hire you based on current or past bankruptcy filings. However, it rarely happens.
Suppose you suspect your employer has terminated you based on outstanding debts (i.e., credit card debt, medical bills, student debt, an unpaid auto loan or personal loans, etc.), filing for bankruptcy, etc. In that case, there may be a case against your employer for illegal discrimination. However, it’s essential to note that declaring bankruptcy doesn’t protect you from being terminated for employment misconduct.
How Do Employers Learn About An Employee’s Bankruptcy?
It’s uncommon for an employer to find out about Chapter 7 (straight bankruptcy), Chapter 11 (reorganization bankruptcy), or Chapter 13 (repayment plan bankruptcy). However, depending on the job, company, and type of background check, it’s possible.
Generally, the most common ways employers learn about bankruptcies include but are not limited to the following:
- Wage garnishment to repay debts due to bankruptcy filings
- Chapter 13 repayment plan deductions from your payroll
- You owe money to your employer, and the debt included in your bankruptcy filing
- Pre-employment credit and background checks
- Public financial records easily accessible by HR and legal departments
However, it’s essential to remember that in most cases, your employer can’t terminate, demote, or discriminate against you, regardless of the type of bankruptcy filed. If you suspect that you’ve been illegally discriminated against, it may be in your best interest to seek legal counsel.
Will The Bankruptcy Trustee Inform My Employer When I File For Bankruptcy?
Generally, no. Your bankruptcy trustee or the United States courts will not inform your employer of bankruptcy. However, there are ways your employer can learn about bankruptcy filings.
It’s important to note that in some occupations (especially those requiring professional licensure), you may be required to self-report Chapter 7 bankruptcy, Chapter 13 bankruptcy, and other bankruptcy filings. In most other cases, employees are not obligated to inform employers when they file for bankruptcy discharge.
Will The Bankruptcy Court Publish Your Bankruptcy Filing?
The bankruptcy process is available for public viewing unless your court records are sealed. Since information related to bankruptcy filings is public record, that means that after you file bankruptcy paperwork, related financial documents, and a debt repayment plan to the courts, it can be accessed via the PACER system.
Will my bankruptcy be published in the newspaper?
In most cases, no. Your bankruptcy petition won’t be published in the local newspaper. However, sometimes small municipalities may publish local court records of bankruptcy (including chapter 7 and chapter 13).
Do Bankruptcies Show Up On Background Checks?
Suppose your employer runs a statewide criminal background check. In that case, your bankruptcy case will not appear. However, if they conduct a federal records check, they will know if you’ve filed for bankruptcy within the last 7 – 10 years, depending on the type of bankruptcy filed. Learn more below.
- Do bankruptcies appear in civil court background checks: No.
- Do bankruptcies appear in criminal background checks? No.
- Do bankruptcies appear on a credit report: Yes. For 7-10 years.
- Do bankruptcies appear in federal records checks? Yes. For up to 10 years.
Most employers can’t/don’t discriminate against applicants for bankruptcy due to preference or bankruptcy laws. However, an employee’s inability to pay creditors can be a deciding factor when considering employment for individuals seeking or already in roles related to managing finances.
How Does Bankruptcy Affect My Ability to Get A Security Clearance?
If you work for the U.S. government, state government, or government contractor, you may be required to hold a security clearance. With that in mind, one essential factor employers consider when deciding to grant or revoke a security clearance is financial responsibility.
If your employer deems that you’ve filed for bankruptcy for a “good reason” (i.e., divorce, medical bills, loss of a job, etc.), they may still issue a security clearance. However, they may be more inclined to deny or revoke a security clearance if they believe your bankruptcy is due to irresponsibility, failure to pay tax debts, or recklessness.
Can You Work At A Bank If You Filed Bankruptcy?
Generally, banks can’t fire you or refuse to hire you strictly based on a bankruptcy case. However, banks and other financial institutions can fire you or reject employment based on poor credit history. In most cases, if a potential employer asks for your permission to run a credit check, it’s important to be upfront about current or past bankruptcy proceedings.
Can You Hide Bankruptcy on a Credit Report?
Under most circumstances, you can’t hide bankruptcy on your credit report. The only ways to “hide” bankruptcy are to dispute an illegitimate bankruptcy on your credit report or wait for 7-10 years for it to fall off. Generally, the more years that have passed since a bankruptcy, the better it will look on your report.
How Can I Build Back My Credit After Bankruptcy?
Chapter 7 and Chapter 13 bankruptcy should be your last option. In many cases, there are other debt-relief options to consider before taking such a drastic approach. They include but are not limited to credit counseling, debt settlement, debt consolidation, creditor negotiations, and more.
However, if you and your bankruptcy lawyer have decided that bankruptcy is the best option, there are ways to rebuild your credit afterward. They include but are not limited to the following:
- Don’t borrow money too soon after you file bankruptcy
- Make all of your payments on time
- Consult with a financial planning professional
- Make and stick to a personal budget plan
- Monitor your credit reports and dispute any inaccuracies
- Obtain a secured credit card
- Consider working with a credit counselor at a credit counseling agency
Before you go to bankruptcy court, it’s recommended that you consult with a bankruptcy attorney in your area as soon as possible. Continue reading to learn how the bankruptcy lawyers at Ziegler Diamond Law can help.
Contact a Florida Bankruptcy Lawyer Today
Are you facing overwhelming debt? In that case, it may be in your best interest to declare bankruptcy. However, that’s not always the best debt relief strategy to take. At Ziegler Diamond Law, our bankruptcy attorneys offer many consumer debt relief programs, including:
- Chapter 7 & Chapter 13 bankruptcy assistance
- Debt collection lawsuit defense and negotiations
- Assistance filing creditor harassment claims
- Help with erasing creditor error claims
- Foreclosure Defense
- Debt consolidation
The legal process associated with filing bankruptcy can be complicated, confusing, and frustrating. The good news is that you don’t have to go through the process alone. We’re here to help you recover financially, step-by-step. Our bankruptcy attorneys understand bankruptcy laws, the legal process, and how to help you recover from your debts as fast as possible.
We’re here to help you get rid of debt and build a financial future you can be proud of. Contact us today to schedule your free initial consultation with a Florida bankruptcy attorney you can trust.