While there’s no shame in being in debt, a lot of people still worry that they’ll be judged for falling on hard times – even if there’s nothing they could have done to prevent their financial situation.
Many people are deeply concerned about the idea that their boss might find out about their bankruptcy – and what might happen if they do. Here’s what you need to consider.
Bankruptcies are public records – but your boss may still never find out
Whether or not your boss is notified of your bankruptcy may depend largely on what type of bankruptcy you file. Chapter 7 (“total”) bankruptcies are typically over within a few months of filing and there is usually no reason for the court to notify someone’s employer. Unless your boss is in the habit of reviewing bankruptcy filings, they will likely never know.
If you file for Chapter 13 bankruptcy, however, your boss may receive a notice. That’s because Chapter 13 is a debt reorganization process, and your repayment plan may involve automatic wage deductions that are handled through payroll. In that case, your boss may become aware of your financial situation.
Even if your boss does find out, they’re forbidden by law to hold it against you
Your employer is not permitted to take negative employment action against you solely on the basis of your bankruptcy. This is spelled out in Bankruptcy Code (11 U.S.C. § 525), which makes it illegal for both private and government employers to terminate or discriminate against employees because they filed for bankruptcy.
If your job requires a security clearance and your financial records are periodically reviewed, bankruptcy can be seen as a positive. Once you have proactively handled your debts, you’re actually less of a security risk than someone who is still financially floundering.
Don’t be afraid of bankruptcy. It’s far more common than you think – and your employer knows that. Legal guidance can help you learn more.