Federal law prohibits any employer from firing someone because they filed for bankruptcy. Under Section 525 of the bankruptcy code, termination, discrimination, or denial of employment due to bankruptcy is forbidden. This includes both government and private employers.
However, as any Los Angeles bankruptcy attorney knows, an employer can fire you for lying, breaking workplace rules, being incompetent, or persistent tardiness. Bankruptcy won’t protect you in these instances. But the terms of your employment won’t change as a result of a bankruptcy filing, meaning your employer can’t reduce your salary, demote you, or take away job responsibilities due to your filing.
Ways Bankruptcy May Impact Your Job
There are limited exceptions in which bankruptcy impacts your job search. One example would be if you’re applying for a job in the private industry that requires you to manage money. In this case, a bankruptcy filing may be seen in a negative light.
Sometimes, filing for bankruptcy can improve your odds of landing a job. If you have debt, an employer that requires security clearance, such as the CIA or FBI, may consider you at high risk of accepting a bribe. Your chances of being tempted by bribes decreases with bankruptcy, since it wipes out your debts.
The bankruptcy code also protects you from being denied a professional license due to your bankruptcy status. However, the standards of your profession may come into play, so neglect of financial matters can influence the decision of a licensing board. Licensed professionals who must agree to background and credit checks include lawyers, insurance agents, doctors, and pharmacists.
How My Employer Can Find Out About Bankruptcy
While Chapter 7 or Chapter 13 bankruptcy should not affect your employment, your employer can find out about it in several ways. These include:
- Stopped wage garnishments: A notice provided by you or your attorney will inform the company to stop a wage garnishment. This can be a good thing. The company or someone in payroll already knew you were having financial difficulties, and bankruptcy is a way to move toward resolving your financial problems.
- Owing money to the company: Bankruptcy paperwork requires you submit a list of all your debts. These can include payroll overpayments. If you list these, your employer will receive a notice of your bankruptcy case.
- Making Chapter 13 payments: Your employer will find out if a judge orders Chapter 13 payments to be deducted automatically from your paycheck. This essentially turns your employer into a collection agency. It must be informed to send your deducted wages to the bankruptcy court.
- A credit check: A bankruptcy will appear on your credit report, and employers often do a credit check when hiring a new employee. Some even do regular credit checks on their staff. That means charge-offs, slow pays, and repossessions, and even lawsuits, might raise a red flag. Usually, this is only the case if your job involves handling money, but it points out that employers can and do access your credit information.
Contact OakTree Law for bankruptcy Help
If you are drowning in debt, bankruptcy should not affect your employment. But it can help improve your financial situation and even discharge some of your debts. To reduce your risk and make filing for bankruptcy easier, contact our Los Angeles and Orange County bankruptcy attorney. At OakTree Law, we’ll provide a free consultation to discuss your situation and options that can help you regain control of your financial future. Call us at 562-219-2979 or request a free evaluation today!