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Does your employer need to know if you file for bankruptcy?

On Behalf of | Nov 27, 2022 | Bankruptcy

People file for bankruptcy every day to get out from under a mountain of debt and get a fresh financial start. If you’re considering this move for yourself, you may prefer that no one knows who doesn’t have to. We all have a right to some financial privacy.

When someone files for bankruptcy, they often wonder if they have an obligation to tell their employer and what the consequences could be if their employer were to find out. Let’s look at both of these questions.

Typically, you have no obligation to tell your employer. There’s generally no reason they would find out unless you’re having your wages garnished to pay your debts and that garnishment stops with your bankruptcy. If you work for a large company, that may just be something that your human resources or payroll department handles, so your immediate boss wouldn’t necessarily know about any changes.

There are some rare instances where your employer might know about it. For example, if they’re one of your creditors, they would know about it. Again, this might only be known at a higher level in your company.

Can you lose your job?

Federal law protects those who file for bankruptcy from discrimination by current and potential employers. Both public and private employers are prohibited from firing them or otherwise penalizing them because of their personal bankruptcy.

As for future jobs, it depends on what line of work you’re in. Financial institutions and law enforcement agencies typically run credit checks. They can potentially decline to hire someone if they believe their financial situation could be a risk to the organization. 

Of course, having a lot of debt on your credit report would probably keep you out of the same jobs. If you’re applying for a job where a credit check is required, it’s better to get ahead of the situation and explain the reasons for your bankruptcy.

If you’re considering bankruptcy, it’s normal to have a lot of questions and concerns – many of which may be unfounded. Having experienced legal guidance can help you sort out fact from fiction.