If you plan to file for bankruptcy, you might be worried about the effect it could have on your employment. For instance, many people wonder:
Although your employer might learn about your bankruptcy case, rest assured that in most situations your bankruptcy won't affect your current employment. However, it might prevent you from getting a job in private industry later.
No employer—government or private—can fire you solely because you filed for bankruptcy. Nor can an employer use a bankruptcy filing as a reason to change other terms or conditions of your employment. For instance, your employer can’t:
However, if the employer has other valid reasons for taking these actions, such as tardiness, dishonesty, or incompetence, the fact that you filed for bankruptcy won’t protect you.
But if you’re fired shortly after your employer learns of your bankruptcy—and no other justifications exist—you might have a case against the employer for illegal discrimination.
Employers rarely find out about a Chapter 7 bankruptcy filing. But it can happen. Here’s how.
Many jobs require a security clearance. If you’re a member of the armed forces or an employee of the CIA, FBI, another government agency, or a private company that contracts with the government, you might have a security clearance.
Do you risk losing your security clearance if you file for bankruptcy?
Probably not—and the opposite might be true. According to credit counselors for the military and the CIA, a person with financial problems—particularly someone with a lot of debt—is at high risk of being blackmailed. By filing for bankruptcy and getting rid of the debts, you substantially lower that risk. Bankruptcy usually works more in your favor than to your detriment.
No federal, state, or local government agency can consider your bankruptcy when deciding whether to hire you. Private employers, however, aren’t constrained by a similar rule, and some people find that having a bankruptcy in their past comes back to haunt them.
Many private employers conduct a credit check on job applicants. The employer will find out about your bankruptcy from the credit report. A bankruptcy filing causes problems mainly for those applying for jobs that require them to deal with money, such as bookkeeping, accounting, payroll, and so on.
While an employer needs your permission to run a credit check, employers can also refuse to hire you if you don’t consent. If you’re asked to give this authorization, consider speaking candidly about what the employer will find in your file. Being honest and upfront might outweigh the negative effects of the bankruptcy filing.
Learn about other things to consider before filing in Bankruptcy: Should I File?