Will Bankruptcy Affect My Job? Exploring the Impacts
Filing for bankruptcy, whether it’s under Chapter 7 bankruptcy or deciding to proceed with bankruptcy relief under a Chapter 13 plan, might have you worried about your current employment status. Sometimes, debt consolidation or debt settlement isn’t possible, necessitating the person file bankruptcy. Since filing for bankruptcy protection is a matter of public record, many people want to ask, “will bankruptcy affect my job?”
Exploring the Impact of Bankruptcy on Current Employment
When you file for debt relief under the bankruptcy code, your finances come under the purview of the bankruptcy court. You must provide substantial disclosure of your financial history, including income, expenses, information about property, and liabilities, when you file bankruptcy. While this disclosure by the debtor is necessary and required under bankruptcy law, it means that almost any individual, as well as a private employer, may look up this information.
Employers may conduct background checks, as well as credit checks, that would reveal your bankruptcy filings. Although filing for bankruptcy protection is public record, it doesn’t necessarily mean your employer can terminate you because of it.
Is Your Job at Risk After Filing for Bankruptcy?
Under 11 USC 525, provisions are in place to protect individuals who have filed for bankruptcy from discriminatory treatment by employers. Specifically, both governmental and private employers are barred from terminating an individual’s employment or discriminating with regard to employment, such as in hiring or in the terms and conditions of employment, solely because the individual has filed for bankruptcy, has been insolvent before the bankruptcy was initiated, or has not paid a debt that was discharged in the bankruptcy. This statute ensures that debtors are not unfairly penalized in their professional lives for seeking the legal relief that bankruptcy provides.
Challenges do arise when a person who is licensed and also holds client funds in trust, such as a stockbroker or a lawyer. In those cases, the authority that reviews licenses may inquire about the management of client funds, and explore whether the bankruptcy was a consequence of bad acts. If there was misappropriation or misuse of client funds, that fact may lend towards suspension or termination of the debtor’s license.
Keep in mind, however, that the license isn’t terminated because of the bankruptcy filing, but rather because of potential bad acts of the debtor. This would also be allowed by any other private employer, since a person engaging in criminal or otherwise detrimental behavior may be a basis for termination of employment.
How Employers Might Learn About Your Bankruptcy
Bankruptcy filings are public records accessible through the PACER system, meaning your current or future employer could potentially learn about your filing status. Thus, one way that a private employer may learn about you filing bankruptcy is, if in the course of a background check or credit check, the research pulls in the notification of the bankruptcy proceedings.
Another way that an employer may learn of a personal bankruptcy is if a creditor is pursuing a wage garnishment. As an example, let’s say a bank with which you have credit card debt sues you. They ultimately obtain a judgment against you. One of the ways a creditor can enforce a judgment is with a wage garnishment. The judgment creditor, in this case the credit card bank, can direct a marshal or sheriff to execute a wage garnishment if the creditor knows about the debtor’s employment. A notice of wage garnishment will be sent by the marshal or sheriff to the employer.
The Role of the Bankruptcy Trustee in Disclosing Your Financial Status
In bankruptcy proceedings, a bankruptcy trustee is appointed to oversee your case. This trustee has the duty, among other things, of reviewing your bankruptcy petition for fraud, as well as to identify property that may be liquidated to pay off creditors.
It’s very rare for a trustee to notify a debtor’s employer about a bankruptcy filing. What is more likely is, in the case of a debtor who discloses that they are employed by a closely held corporation (such as a small, family business), and it appears the debtor may have an interest in the business, the trustee may reach out to the employer and request more information. As a result, the employer would learn about the debtor’s bankruptcy case.
Do Background Checks Reveal Bankruptcy Filings?
Generally, background checks that are commercially available scrape publicly available records, particularly court records. A credit check, which is often included in many background reports, will include information about court filings, including lawsuits by creditors and any filings for bankruptcy relief.
Also, if you are considering buying real estate or trying to save your home with a loan modification, the bankruptcy filings will also likely be revealed. If you are applying for a mortgage in connection with buying real estate, the mortgage bank will likely require title insurance. As part of getting title insurance, a title report is generated, which pulls court cases and judgments, including info about any prior bankruptcy case.
Navigating Future Employment Opportunities Post-Bankruptcy
After filing for bankruptcy, it’s crucial to understand how it might affect your job search. A potential employer will often conduct checks on job applicants, and while a bankruptcy filing can influence their decision, a potential employer is prohibited under the bankruptcy code from discriminating against a debt solely because they file bankruptcy.
In certain industries, especially in positions where you are licensed and are responsible for the funds of clients, a potential employer may inquire further into why you filed for debt relief under the bankruptcy code. Being upfront about your financial history, including filing for bankruptcy protection, and demonstrating that you’re taking steps to improve your situation can help mitigate any concerns a prospective employer might have.
Security Clearances: A Key Consideration in Certain Industries
For those in the armed forces or working for a company that contracts with the government, security clearances are critical. Bankruptcy can raise questions about your financial trustworthiness, potentially affecting your clearance. However, demonstrating that you’re actively addressing your financial problems can substantially lower that risk, showing that you are taking responsible steps towards financial stability. Moreover, and as previously mentioned, employers are prohibited by bankruptcy law from taking discriminatory action against a person because of their bankruptcy case.
Rebuilding Your Financial Reputation to Secure Sensitive Positions
After filing bankruptcy, it’s essential to focus on rebuilding your financial well-being. This means addressing any financial problems head-on and taking steps towards recovery. While bankruptcy can initially seem like a setback, especially in securing sensitive positions that require trust and reliability, demonstrating a clear commitment to financial responsibility can help mitigate concerns and rebuild your professional image. This may include working with a money coach or a budgeting coach. If financial issues were caused by activity like gambling, it may mean working with a counselor for treatment.
The Legal Protections for Employees Who File for Bankruptcy
As mentioned previously, federal law provides protections for individuals who have declared personal bankruptcy, ensuring that it doesn’t unfairly affect your job. Your employer cannot fire you solely because you’ve declared bankruptcy.
If a debtor believes that they were terminated or otherwise discriminated against solely because of filing bankruptcy, the debtor may reopen their bankruptcy case and sue the employer.
Can an Employer Terminate Your Position Due to Bankruptcy?
As mentioned before, an employer is prohibited from terminating employee because of bankruptcy proceedings. Additionally, an employer may not discriminate against a debtor with respect to future employment because they filed for bankruptcy relief. There are protections in the bankruptcy law that prevent such actions, aiming to ensure that individuals seeking financial recovery through bankruptcy aren’t unfairly punished in their employment. However, employers may still make decisions based on performance and business needs, not necessarily tied to your bankruptcy status.
The Influence of Bankruptcy on Specific Professions
Bankruptcy can impact different professions in various ways. For those in sectors like banking or finance, where financial trustworthiness is paramount, a bankruptcy filing might necessitate a more in-depth explanation during the job application or job review process. However, the impact is not uniform across all professions, and many find that their career is not significantly affected in the long term.
Special Considerations for Working in the Banking Sector
Working in the banking sector post-bankruptcy requires careful navigation. Given the industry’s emphasis on financial stability and direct management of client funds, a bankruptcy filing might be scrutinized more closely than in other fields. It’s important to prepare to discuss the circumstances of your bankruptcy candidly and to highlight the steps you’ve taken towards financial recovery. Demonstrating your commitment to financial responsibility can help mitigate potential concerns from employers in the banking sector.
Steps to Rebuild Your Credit and Professional Image Post-Bankruptcy
There are a ton of bankruptcy myths surrounding rebuilding your credit score after filing for debt relief, so it’s important to understand what you can expect. Generally, many people receive offers for a new credit card soon after their case is over (and in some cases, even before the discharge is entered). Basically, issuers of credit card debt want to be first in line to be your new creditor. To build your credit score, you have to use credit, and that means incurring credit card debt any paying it off in a timely manner. To help keep you on track, it helps to create a budget, stick to it, and pay off debts as they come due. By demonstrating financial responsibility, you’ll begin to rebuild trust with potential employers and creditors alike.
Practical Tips for Improving Your Financial Standing
One key to improving your financial well-being after bankruptcy is to check out your credit report. Make sure all discharged debts are accurately reflected on the report, and work on paying your current bills on time. This positive activity helps increase your credit score over time.
Another tip that may help improve your financial health after a personal bankruptcy is working with a money coach. Money coaches help with creating budgets, controlling spend, and managing money habits.
Can You Conceal Bankruptcy from a Credit Report or Employer?
While you might wish to keep your bankruptcy private, it’s not possible to hide it from your credit report. Both Chapter 7 and Chapter 13 bankruptcy generally appear on credit reports, as well as other background searches (such as title reports if you are buying real estate). As for employers, current ones typically won’t be notified unless they have been contacted about a wage garnishment. A potential employer conducuting due diligence for future employment, on the other hand, may find out through a background check or a credit check during the hiring process. As mentioned previously, it’s important to be honest and transparent when asked directly about filing for bankruptcy.
Final Thoughts: The Road to Recovery and Maintaining Your Career After Bankruptcy
One of the biggest bankruptcy myths is that it is almost impossible to recover from. While bankruptcy can seem like a major setback, it’s very much possible to recover and even thrive professionally. By understanding how bankruptcy affects your job, taking steps to rebuild your credit, and utilizing legal protections, you can thrive in all aspects of your life. Remember, bankruptcy is a chance for a financial fresh start and an opportunity to rebuild your financial foundation stronger than before.
Seeking Professional Advice: The Importance of Consulting with a New York City Bankruptcy Lawyer
If you’re considering chapter 7 bankruptcy or chapter 13 bankruptcy, it’s super important to consult with a NYC bankruptcy attorney, like the Law Office of Richard Kistnen, as early as possible in the process. A bankruptcy attorney can help you navigate the procedural complexities of bankruptcy, and help you understand how filing bankruptcy affect your assets, income, employment and more.
Schedule Your Free Consultation with the Law Office of Richard Kistnen to Navigate Your Bankruptcy Questions
If you’re asking yourself the question, “will bankruptcy affect my job?”, then you need to speak with a bankruptcy lawyer, like the Law Office of Richard Kistnen, right away. A bankruptcy attorney can offer you c insights about whether you qualify, how a chapter 7 bankruptcy vs chapter 13 bankruptcy will affect you, and help you understand how the process might impact your job. Don’t wait any longer. Call the Law Office of Richard Kistnen today at (718) 738-2324, or click here right now to book your free, no obligation virtual bankruptcy consultation.