Will Bankruptcy Affect My Job or Future Employment?

In most situations, bankruptcy won't affect your current employment; however, it might come into play if you are applying for a job in private industry.

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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:

  • Will an employer find out about a Chapter 7 or Chapter 13 bankruptcy?
  • Can an employer fire an employee who has filed for bankruptcy?
  • Is it legal to pass over a job applicant due to a bankruptcy filing?

Although your employer might learn about your bankruptcy case, rest assured that your bankruptcy won't affect your current employment in most situations. However, it might prevent you from getting a job in private industry later.



Will You Lose Your Job Due to Bankruptcy?

No employer can fire you solely because you filed for bankruptcy. And an employer can't use a bankruptcy filing as a reason to change other terms or conditions of your employment.

Specifically, your employer can't do the following:

  • reduce your salary
  • demote you, or
  • take away responsibilities.

If your employer fires you soon after learning of your bankruptcy and no other justifications exist, you might have a case against the employer for illegal discrimination. But bankruptcy won't shield you from other employment misconduct, so if you've been tardy, dishonest, or incompetent at your job, the fact that you filed for bankruptcy won't affect your termination.

Will the Bankruptcy Court Publish Your Bankruptcy Filing?

Yes, all bankruptcy filings are public records, except for sensitive information, such as account numbers, Social Security numbers, and minor children's full names and birthdates.

But looking up a bankruptcy case on the court's Pacer system isn't a simple process. Unless your boss knows you filed, it's unlikely your employer would check your bankruptcy filing status.

Will the Bankruptcy Trustee Contact Your Employer?

No, bankruptcy trustees don't routinely talk with a filer's employer, and the court doesn't send a notice of the bankruptcy case out to employers. But employers can find out about a bankruptcy filing in other ways. Keep reading to learn how.

How Do Employers Learn About an Employee's Bankruptcy?

Again, employers rarely find out about a bankruptcy filing. But it can happen, and here's how.

  • You have a wage garnishment. A bankruptcy won't stop a wage garnishment unless you or your attorney tell your employer you filed. The good news? Most employers will welcome your efforts to take affirmative steps to put your problems behind you.
  • You file for Chapter 13 payments. In some bankruptcy courts, the judge requires your employer to deduct your Chapter 13 bankruptcy payments from your wages and send the funds to the Chapter 13 trustee responsible for your case. Your employer will serve as a collection agency of sorts to ensure you honor your Chapter 13 plan.
  • You owe your employer money. You must list all your debts when filling out your bankruptcy paperwork. For instance, if you're paying back a payroll overpayment, you'll have to include it, and your employer will get notice of your bankruptcy case.

Security Clearances, Bankruptcy, and Employment

Many jobs require a security clearance. Suppose 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. In that case, you might have a security clearance.

Do you risk losing your security clearance if you file for bankruptcy?

Probably not, and your bankruptcy might prove beneficial. According to credit counselors for the military and the CIA, people with a lot of debt can be targets of blackmail. You substantially lower that risk by filing for bankruptcy, so filing usually works more in your favor than detriment.

How Does Bankruptcy Affect Job Applicants?

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 haunts them.

A bankruptcy filing causes problems mainly for those applying for jobs dealing with money, such as bookkeeping, accounting, and payroll. So how does an employer find out you filed? Many private employers conduct credit checks on job applicants, so employers learn about bankruptcies from credit reports.

While an employer needs your permission to run a credit check, employers can refuse to hire you if you don't consent. If your employer asks for this authorization, consider speaking candidly about what the employer will find. Being honest and upfront might outweigh any adverse discoveries.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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Helpful Bankruptcy Sites

Department of Justice U.S. Trustee Program

United States Courts Bankruptcy Forms

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

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You should not send any sensitive or confidential information through this site. Any information sent through this site does not create an attorney-client relationship and may not be treated as privileged or confidential. The lawyer or law firm you are contacting is not required to, and may choose not to, accept you as a client. The Internet is not necessarily secure and emails sent through this site could be intercepted or read by third parties.

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