The decision to file for bankruptcy isn't an easy one. Besides lowering your credit score and increasing your insurance rates, in some cases, bankruptcy has implications for your employment.
If you're worried about whether your current employer will find out, it may help to know that bankruptcy laws offer you some protection. In many cases, however, your employer won't even know.
Your Employment Rights Under the Law
Your current employer cannot legally fire you just because you filed for bankruptcy. Under the law, anyone associated with you, including your spouse or other family members, can't lose their jobs either. Your employer can terminate your employment for other reasons, but not because you have a bankruptcy case pending.
The same applies when it comes to professional licenses. You cannot lose your license simply because you filed for bankruptcy.
Likewise, if you're up for a promotion or raise, your employer may not discriminate against you based solely on your bankruptcy. If it does, it will be violating the law.
Your employer also can't demote you or cut your salary if it finds out you filed for bankruptcy. The law applies to both government and private employers.
If your employer goes ahead and fires you anyway, you can sue in court to get your job back. The court may even award you back wages if you win your case. If it comes to this, research bankruptcy attorneys; they can be a great asset and protection when navigating the legal field.
You don't have as much legal protection if you go looking for a new job after you file for bankruptcy. Although a government employer can't refuse to hire you, a private company can legally deny you employment.
Many private employers perform credit and background checks before making a hiring decision. If your bankruptcy shows up, you may not get the job, even if it's the only strike against you.
A private employer also has the right to terminate your employment after hiring you on a provisional status. If, during your probationary period, your employer finds out you have a bankruptcy on your record, you could lose your job. It doesn't matter that you authorized the background check. But if you don't consent to a background or credit check, an employer can refuse to hire you.
When Your Employer Will Know
In most cases, your current employer won't even know that you've filed for bankruptcy. If you owe your employer money, that's a different story. In that case, you will have to list your employer as a creditor in the bankruptcy petition. Like your other creditors, the bankruptcy court will notify your employer that you've filed for bankruptcy.
If you file for Chapter 13 bankruptcy, the bankruptcy court can enter an income or earnings withholding order. The order instructs your employer to deduct a set amount of money from each of your paychecks in accordance with the Chapter 13 payment plan you submit. Your employer will know that you've filed bankruptcy, as it must forward your payroll deductions to the trustee managing your bankruptcy case.
As long as you stay current and make your plan payments to the trustee on time, the bankruptcy court may not issue a wage withholding order, in which case your employer won't know.
If your wages are being garnished at the time you file for Chapter 7 bankruptcy, the creditor will notify your employer to stop withholding money from your paycheck. Bankruptcy puts a temporary stop to wage garnishment during your bankruptcy case.
The automatic stay under Chapter 7 bankruptcy prevents most creditors from continuing to collect on the debt before your bankruptcy case is settled. Wage garnishment to collect for child support is an exception.
If you're worried about your employer reading about your bankruptcy in the paper, many newspapers don't publish the information even though it's a matter of public record. A business that files bankruptcy may hit the papers because that's news. But readers aren't usually interested in the financial woes of private citizens.Share
12 December 2014
Although many people don't think of having legal counsel as improving their life, I have found that it has really helped me to feel empowered as a business owner. Without my lawyer, it was really difficult to figure out what I could say and what I couldn't say, and it really made things hard when I was out and about trying to make business deals. Fortunately, after I found the right lawyer, things became a lot more straightforward. This blog is all about improving your life and streamlining your business with the help of a great lawyer. After all, you never know when you will find yourself in court.