One of the concerns that many people have when considering filing for bankruptcy is whether their employer (or potential employers) will know about it. In most cases, they won’t unless you tell them.
People who file for bankruptcy have protections under both the Bankruptcy Code and the Fair Credit Reporting Act (FRCA). Learning more about what to expect may ease your mind about bankruptcy.
What can prospective employers find out?
About a quarter of employers do credit checks on job applicants, although they have to get written permission to run a credit check. Unless you’re applying for a job where you’ll have financial responsibilities, which can include handling cash, have access to sensitive or confidential information or need a security clearance, they likely won’t run a check.
Private employers (unlike government employers) aren’t strictly prohibited from refusing to hire someone because of bankruptcy. However, depending on the nature of the job, they may be able to legally consider your financial history. If you can’t avoid an employment credit check, your best bet is to explain your situation to the prospective employer and emphasize that you’re taking responsible steps, including bankruptcy, to get back your finances back under control.
When could your employer find out about your bankruptcy?
Most people have no obligation to tell their employer they’re filing for bankruptcy. There are some exceptions. For example:
- If you’re filing Chapter 13 and your repayment plan involves payroll deductions
- If you have a company credit card where you’re responsible for the payments rather than your employer
- If you have a professional license and your licensing board requires you to report bankruptcy
In most professions, personal bankruptcy should have no effect on someone’s ability to do their job. Even in those where a level of financial responsibility is required, the reason for the bankruptcy will likely be considered. Having overwhelming medical debt because of a health crisis isn’t the same as being mired in debt because of a gambling problem.
It’s always important to weigh the pros and cons of bankruptcy. This can include any potential effect on your job or your job prospects. If you understand the bankruptcy process, you can make a more informed decision about whether it’s the right step for you and have a better chance of emerging from it to a more stable financial future.