Bankruptcy and Your Career: What You Need to Know

Fear is a common emotion when people consider the option of bankruptcy. How an employer may react is a frequent concern. People in a financial bind would understandably feel concern that their source of income could be put at risk - or that the decision to file could disrupt their future employment goals. The risk may not be as high as people expect.

Employers do not receive a notification of bankruptcy when an employee files or receives a discharge. Bankruptcy information is made public, but most people will probably never view the information. Filers miss very little work because they only meet with a bankruptcy attorney in-person a couple of times and court hearings are a one-time event.

An occasion when an employer could find out is if Chapter 13 bankruptcy is filed. Filers that choose Chapter 13 bankruptcy protection may need to have their paycheck garnished as part of their repayment plan. Employees can choose to make the information available to their employer beforehand to avoid a surprise notification.

Honesty about the situation can help to avoid conflict if the employer hears about the filing. Anyone can experience financial problems and most employers do not equate credit scores with ability. Tell the truth, and explain briefly how the problem developed.

Employers cannot legally fire someone because of a bankruptcy. However, if other behavioral or performance problems exist with the employee, or if the company were ready to downsize, the notification may encourage them to let the individual go. If an employee loses their employment immediately after a bankruptcy, they may have a case for discrimination.

Section 525 in the U.S. Bankruptcy Code prevents employment discrimination due to bankruptcy. Professional licenses are also not at risk because the law prohibits the government from pulling licenses after bankruptcy or from refusing to renew or award a license to a qualified candidate.

A skilled, trusted employee that has shown their value to an employer over time may feel confident their position is secure, however, a job hunt can make people feel much less comfortable about their chances. You should remember that the only way the employer will know of the bankruptcy is if they decide to pull the credit report and actually review it.

Not every employer automatically downloads a credit report. Even the employers that ask candidates for their permission to review their report do not always bother to do so. Sixty percent of employers pull credit reports, however, they do not necessarily do it for every position. Only 13 percent of those that get the information will check all the reports they receive.

Credit reports typically only become an employment factor for positions that involve money handling or a security clearance. Even then, the checks are to make certain there is no evidence of someone living beyond their means or careless behavior. Bankruptcy does not necessarily happen due to these behaviors.

Bankruptcy can often make employers less uncomfortable than they are with a candidate that has a large amount of debt. People that owe more money than they can repay are at risk of garnishment, lawsuits, and other distractions. An employer may feel a high debt load could encourage the candidate to make unethical decisions like embezzlement.

The decision to file bankruptcy can cause people to feel vulnerable and concerned about their future. Questions about what to expect are common as people go through the process. At Custer, Custer & Clark LLC Attorneys at Law , we want our clients to ask questions so they feel comfortable about the choice they make. Schedule a consultation today.