Will Bankruptcy Affect my Employment?

If you have filed or are considering filing for bankruptcy, you may be concerned about what effect it will have on your job. Federal law protects employees from discrimination based on bankruptcy. However, some applicants are not protected from bankruptcy discrimination in hiring. 

Discrimination in Employment Based on Bankruptcy

Federal law (11 U.S.C. Section 525) prohibits employers from firing employees or discriminating against them on the job solely because they have filed for bankruptcy or received a bankruptcy discharge. This prohibition applies to public (government) and private employment alike. If you have a job when you file for bankruptcy, you are legally protected from discrimination. 

Future Job Opportunities

The rules are different when it comes to hiring. Applicants for government jobs cannot be discriminated against solely because of a bankruptcy filing. However, applicants for private employment have no such protection. In other words, it is legal for a private employer to deny you a job just because you filed for bankruptcy. 

Hiring and Your Credit Report

Federal law allows employers to check applicants' credit reports when making hiring decisions, as long as the applicant gives prior written consent. However, a growing number of states have passed laws that greatly restrict -- or outright prohibit -- employers from checking credit reports. These states have recognized that the recent financial crisis has led many into debt, and that allowing employers to refuse to hire someone solely because of poor credit would only make the problem worse. 

A bankruptcy filing may stay on your credit report for up to ten years after you receive your discharge. In states that prohibit employers from checking your report, however, it's unlikely a potential employer would learn of your bankruptcy. 

Getting Legal Help

If you face discrimination on the job because you've filed for bankruptcy or received a bankruptcy discharge, you should consult with an experienced lawyer.