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How Does Bankruptcy Affect Your Job and Future Credit?

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How Does Bankruptcy Affect Your Job and Future Credit?

If you find yourself in an untenable financial situation, bankruptcy may be your best option. But that doesn’t mean the process isn’t stressful and overwhelming. There are many considerations. One of the things you may be most concerned about is whether it will affect your current job or future credit. 

Chapter 7 bankruptcy, or liquidation bankruptcy, allows you to discharge all or most of your debt. A court-appointed trustee can liquidate any nonexempt property. Under Chapter 7, most people can keep their home and car, if desired, and receive automatic court protection from creditors. Chapter 7 bankruptcy also stops lawsuits and wage garnishments.

Chapter 13, or reorganization bankruptcy, stops repossessions and foreclosures so you can save your home or investment. Like Chapter 7, it stops lawsuits and garnishments. Chapter 13 can help people keep assets that might be at risk in a Chapter 7. If you declare Chapter 13 bankruptcy, you’ll pay off a percentage of your debt over three to five years, according to a court-mandated plan. 

Chapter 7 is the most common form of personal bankruptcy, making up about 70% of all non-business bankruptcy cases. 

In 2022, 225,455 people filed for Chapter 7 bankruptcy, and 157,087 filed for Chapter 13. 

Will My Employer Find Out About My Bankruptcy Filing? 

The short answer is, probably not. Both Chapter 7 and Chapter 13 bankruptcy filings are public record, but looking up a bankruptcy case on the court’s system isn’t easy. Unless your current employer knows you’ve filed for bankruptcy, they have no reason to check court records. 

However, some Chapter 13 bankruptcies stipulate that your employer takes Chapter 13 bankruptcy payments from your wages. Therefore, they would find out about your bankruptcy filing. This generally is only the case for Chapter 13 filers who fall behind in their Cahper 13 plan payments. However, if you owe your employer money and that debt is in your bankruptcy paperwork, they will receive notification of the filing. 

If My Employer Finds Out That I Filed for Bankruptcy, Can They Fire Me?

Federal laws prohibit your employer from firing you solely because you filed for bankruptcy. They also can’t reduce your salary, demote you, or remove your responsibilities because of a bankruptcy filing. If your employer does fire you because of bankruptcy, it is grounds to sue them for illegal discrimination.

How Does Bankruptcy Affect Future Employment? 

Government employers can’t refuse to hire you because you filed for bankruptcy, but private companies can. Some employers do credit or background checks for security clearances or professional licenses. These prospective employers may learn of your bankruptcy filing during either of those investigations. However, this doesn’t necessarily mean you won’t get the clearance or license. Although you can refuse a credit check from a future employer, that will likely prevent you from securing the position. 

Will Filing for Bankruptcy Affect My Credit Score? 

Your credit score is determined predominantly by how much debt you owe and your FICO credit score. Your FICO credit score helps lenders decide whether to provide you with credit, how much, and at what interest rate. A common question before filing is what does bankruptcy do to your credit? A higher score allows you to borrow more at a lower interest rate. Filing for bankruptcy usually harms your credit score if it is good in the first place. If you already have bad credit, a bankruptcy can actually make it better!

How Long Does Bankruptcy Affect Credit? 

Chapter 7 bankruptcy remains on your credit report for ten years, while Chapter 13 remains on your credit report for seven years. Maintaining a consistent payment history after bankruptcy can help rebuild your credit. 

Compassionate, Nonjudgmental Bankruptcy Representation 

The attorneys at Sawin & Shea, LLC provide quality, compassionate bankruptcy representation for clients from Indianapolis and surrounding areas. They can answer all of your questions about how does bankruptcy affect your job and future credit. Our team has a combined 75 years of experience and can help you get the fresh start you deserve. Contact us for a free consultation. 

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$0 Down Attorney Fees

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.