Filing for bankruptcy is an all-consuming, stressful experience. There are plenty of things that people going through the process worry about — some well-founded and others needlessly. It’s common for bankruptcy filers to worry about how going through the process could affect their job, with many people fearing that their employer will find out and fire them. In most cases, these fears aren’t justified because federal law prevents employers from discriminating against their employees simply because they filed for bankruptcy.

Under U.S. bankruptcy law, your boss can’t fire you solely because you filed for bankruptcy. This is true whether you work for a private company or you’re a government employee. The whole idea behind bankruptcy is to give people in debt a fresh financial start, and losing your job as a result of a filing would certainly work against that goal. Notably,  employers are also prohibited from reducing your pay, demoting you, or otherwise discriminating against you just because you filed.

While bankruptcy itself can’t be grounds for termination, it can play a role in certain job situations. Those include:

• Security clearance positions: If your job is in finance, law enforcement, or defense, it may lead your employer to review your bankruptcy filing during background checks.
• Future employment: Many potential employers run credit checks before hiring, and this is legally allowed. While they can’t reject you solely because of a bankruptcy filing, they are within their rights to consider overall financial history IF it is relevant to the job.
• Trust-related roles: If you’re applying for a job that involves handling money, your bankruptcy could raise questions about your financial judgment.

Bankruptcy filings are public record, but there’s no automatic notification to your employer unless they’re also one of your creditors. In most cases, your workplace won’t ever know about your bankruptcy unless your settlement involves payroll deductions or wage garnishments.

Filing for bankruptcy won’t cost you your job. The law protects you from being fired or treated unfairly because of it, though if you’re applying for a new position in an industry that depends on financial trust, your filing could be considered as part of your assessment. For most employees, bankruptcy remains a private matter that provides relief without putting their livelihood at risk. For more information on how a bankruptcy filing could impact your day-to-day life, contact us today to set up a time for us to speak.