A common question that many of our clients ask as we go through the process of filing a Bankruptcy is “will my job find out?” The very short and sweet answer to the question of “will filing Bankruptcy affect my employment” is a resounding NO. This answer lies directly within the Bankruptcy Code at 11 U.S.C. §525 and reads as follows:
Protection Against Discriminatory Treatment
(a) Except as provided in the Perishable Agricultural Commodities Act, 1930, the Packers and Stockyards Act, 1921, and section 1 of the Act entitled “An Act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1944, and for other purposes,” approved July 12, 1943, a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.
(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
Cannot Be Fired Solely for Filing Bankruptcy
The Bankruptcy Code, as set forth above, states that no private or government employer can penalize you for filing any form of bankruptcy. Of course, employment laws vary from state to state, however, your employer cannot terminate you solely for filing bankruptcy as this would be in violation of federal law, nor can your current employer penalize you in any way, to include salary reduction or demotion.
Will Your Employer Find Out?
Another question we often get asked is “Will my employer find out I have filed Bankruptcy?” In most chapter 13 Bankruptcy cases, your plan payments are payroll deducted. Therefore, your payroll department will be notified. If you have been sued prior to your bankruptcy filing and your employer is garnishing your wages, your employer will receive notification to stop the garnishment due to your bankruptcy filing. If you file a chapter 7 bankruptcy, there is usually no need for the court to notify your employer. Certain employers, however, may require disclosure for such jobs that require a security clearance and, as such, you should always disclose that you have filed if you are required to do so.
If you are having financial problems and have been too worried about your employment to seek help, please don’t continue to struggle on your own. Contact our office nearest you and schedule a free consultation to discuss your options with one of our attorneys.