Will Bankruptcy Affect My Job or Future Employment?

Generally, bankruptcy can't affect your job, but there are a few situations that could affect your employment. Find out what current employees and job applicants need to know, including when an employer might learn about your bankruptcy case and what the law allows.

Bankruptcy and Employment: What You Need to Know

The way bankruptcy might affect employment depends on whether you're currently employed, whether you're looking for a job, and whether your employer is public or private. What's more likely to affect employment status is the underlying financial instability behind bankruptcy when a security interest is involved.

Can You Get Fired for Filing 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 reduce your salary, demote you, or take away your responsibilities solely because of bankruptcy. If your employer fires you soon after learning of your bankruptcy and no other justifications exist, you might have a case for illegal discrimination, but bankruptcy doesn't shield you from termination for unrelated misconduct.

Government vs. Private Employers: Bankruptcy and Employment Decisions

Legal Protections for Current Employees Under 11 U.S.C. § 525

Most employers prefer that employees stabilize their finances through lawful means rather than struggle with unmanageable debt, and federal law codifies key protections. Public employers can't deny or terminate employment based on bankruptcy, and private employers can't fire or otherwise discriminate because of a bankruptcy filing. (11 U.S.C. § 525.)

Will Your Employer Find Out About Your Bankruptcy?

Bankruptcy filings are public records. But it's unlikely your employer will come across the information randomly.

PACER: Public Records and Privacy Redactions

The Public Access to Court Electronic Records (PACER) system provides electronic access to federal case files. However, it would be unusual for an employer to search the system without a specific reason.

If you're concerned about sensitive information—such as account numbers, Social Security numbers, and minor children's full names and birthdates—you don't need to be concerned. It won't appear publicly. The information is redacted (removed) to prevent misuse for identity theft and other inappropriate purposes.

Will the Trustee Contact My Employer?

Most likely not. The bankruptcy court and trustees don't usually have reason to contact an employer. Maintaining employment is part of getting a fresh start, so you can expect those involved in the court process to be sensitive to such things.

Wage Garnishment and Employer Notice

That's not to say that your employer can't learn about the case. For instance, your employer might be notified that the bankruptcy filing has stopped a wage garnishment, or if you owe the employer money, such as a payroll overpayment, and must list the employer as a creditor, they'll also receive notice.

Chapter 13 Wage Deduction Orders and Employer Notification

Yes, if you must make a Chapter 13 payment through an automatic wage deduction (not all courts do this), your employer will learn about your Chapter 13 case. Your employer will also receive notice if the automatic stay order stops a wage garnishment or if you've listed the employer as a creditor.

Bankruptcy and Security Clearances

Many roles in the military, intelligence community, and government contracting require security clearances, and unmanaged debt can create leverage for coercion.

When Bankruptcy Helps Your Security Clearance

By resolving debt through bankruptcy, you often reduce that risk, and the overall effect of filing can be favorable for clearance adjudication when paired with responsible financial conduct.

Reporting Bankruptcy to Your Security Officer

You likely will want to contact your security officer before filing. However, you should discuss this with a bankruptcy lawyer first.

Job Applications, Credit Checks, and Bankruptcy

No federal, state, or local government employer can consider bankruptcy in deciding whether to hire you. Still, private employers aren't similarly restricted and often run credit checks.

Bankruptcy can surface in a credit report, especially for roles involving money. If you decline consent for a credit check, a private employer can usually decline to proceed with hiring. If a credit check is required, be candid about the filing and how you have stabilized your finances after bankruptcy.

How Bankruptcy Affects Your Credit and Employment Prospects

While bankruptcy typically doesn't affect your current job under the protections described above, it will affect your credit in the short term. However, many filers see scores improve within a couple of years with careful use.

For more on credit rebuilding strategies, see resources focused on life after discharge and responsible credit use.

Action Steps After Filing for Bankruptcy

• If hiring involves a credit check, prepare a short explanation of the filing and recovery steps.
• If a garnishment exists, promptly notify payroll or counsel about the filing to stop deductions.
• If you file Chapter 13 in a district using wage orders, confirm employer remittance details with the trustee.
• Keep records of any adverse action tied to bankruptcy status and consult counsel as needed.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. Nolo's bankruptcy resources cover eligibility, filing steps, exemptions, Chapter 7 and 13 differences, and credit rebuilding so you can plan effectively.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.