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Bankruptcy and Your Job

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Bankruptcy and Your Job

One issue that you may worry about when filing for bankruptcy is whether or not it will affect your employment. In the midst of a stressful financial time when you are having to accept the idea that your finances are changing, it is normal to believe that there is a stigma attached to bankruptcy.

Be assured that other people are not necessarily looking at it that way. In one respect, you are making an admirable financial decision to face your problems head-on and make a fresh start.

With current employers:

In a Chapter 13 bankruptcy, your employer may or may not know, In some cases, payments will be automatically deducted from your paycheck as part of your bankruptcy repayment plan.

This does not mean that you will lose your job. In fact, under the U.S. Bankruptcy Code (11 U.S. Code § 525 – Protection against discriminatory treatment) it is illegal to fire someone simply because they have filed for bankruptcy.

There are two circumstances in which your employer could find out about your Chapter 7 bankruptcy:

  1. In a Chapter 7 bankruptcy, your employer would know only if you were already having your wages garnished by creditors (called wage attachment). The bankruptcy would cause an automatic stay, preventing creditors from continuing to attempt to collect debts while you continue with your case. Your bankruptcy attorney will have to notify your employer after filing in order for the garnishment to stop.

Again, this does not mean that you will lose your job. The Bankruptcy Code makes firing someone who has filed for bankruptcy illegal. Additionally, your employer would have already been aware of your financial difficulties because of the wage garnishment, so may see the bankruptcy as a responsible plan to get your financial affairs in order.

2. If you owe your employer money, you would have to list that loan on your SOFA (Statement of Financial Affairs for Individuals Filing for Bankruptcy), That means, that as your creditor, your employer would receive notice of your case.

If neither of these conditions exists, there is no reason for your employer to know about your Chapter 7 bankruptcy. A bankruptcy, however, is a matter of public record. So, if your employer looks for a bankruptcy case, it is likely that they could see the filing information.

What about potential future employers?

If you apply for a new job, your credit may be checked:

  • According to NAPBS (National Association of Professional Background Screeners), 95% of companies conduct some type of background check on potential employees.
  • 16% of companies perform credit or financial checks on all job candidates.
  • Almost 33% of companies do credit checks on some

This doesn’t mean that a credit report showing bankruptcy will definitely cause you to lose a job opportunity. The credit check is typically only done towards the end of the hiring process; the company making the decision is already close to hiring you, so they are already favorably disposed towards you.

There may be no credit check at all.

On the other hand, a bankruptcy (or a history of documented financial difficulties) may have a detrimental effect on your employment if you are trying to get a job involving finance or accounting.

What can you do to offset this problem?

  • Your bankruptcy attorney can advise you on your specific situation, but in general, it is best to be upfront and honest about your difficulties. Perhaps you had unforeseen medical bills or a period of unemployment; explain these things.
  • On the whole, it is unlikely that bankruptcy would stand in the way of a future job. It may be more reassuring to potential employers to see that you are no longer drowning in debt and have taken steps for a fresh financial start.
  • It is worth noting that federal, state, and local government entities are not allowed to deny you a job because of bankruptcy.

At Sawin & Shea Law Firm, we understand that hiring an attorney to help you file bankruptcy is scary. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve.

With years of experience representing good people in bad financial situations, we can answer all your questions. We are here to help.

Please do not hesitate to call us today at 317-759-1483 for a free consultation.

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No upfront attorney fees in qualifying cases. Pay only court filing fee, credit reporting fee, and pre-bankruptcy credit counseling session fee to get a case on file to stop garnishments, repossessions, and certain court actions. Restrictions may apply. Please call to discuss your situation and learn how we can help.