Filing for bankruptcy is a legal way to have many debts forgiven. It can provide you with a fresh financial start, but it is natural to wonder about how it might affect other areas of your life, such as filing for employment.
The answer depends on your individual situation and the type of job you are looking for. The law prevents federal, state, or local government agencies from considering your bankruptcy when deciding whether to hire you. However, private employers do not have to follow this rule; and while it’s illegal for employers not to hire or promote you because you filed bankruptcy, they may run a credit check and consider the results in making hiring decisions. So if you have declared bankruptcy in the past, you may have to defend that decision to a potential employer and prove that this does not negatively affect your ability to be responsible and do the job.
Many private employers conduct a credit check on job applicants, especially if a job involves finance, bookkeeping, accounting, cash or valuable merchandise or if a position requires a security clearance. Your credit report will tell them whether you have filed for bankruptcy.
The fact that an employer finds out that you filed bankruptcy doesn’t mean you won’t get the job. Most will just make it one of many considerations in deciding whether to hire you.
The Fair Credit Reporting Act (FCRA) allows employers to obtain written permission from a potential or existing employee to request that person's credit report. Employers can use this credit history to deny employment, but then they must provide supporting documentation for doing so, provide a written summary of the employee's rights, and three to five business days to dispute credit report errors. If you dispute errors, the employer must reconsider the employment decision and make another ruling and notification.
How to handle bankruptcy with employers
If you refuse to let an employer obtain your credit report, the employer has the right to not hire you, so it is better to be upfront about the fact that you have filed for bankruptcy. Like many other filers, you may have good reasons or unfortunate circumstances -- such as unexpected illness, divorce, or being laid off because a previous employer went out of business -- that caused your financial difficulties. Being honest and explaining your situation often will outweigh any negative effects of the bankruptcy filing.
In addition, job applicants should take the focus off the bankruptcy and stress their strengths and qualifications for the job. Also provide recommendations from previous employers and others who can back up your story.
Can your employer discover a bankruptcy if you’re already employed?
If you are already employed, chances are your employer will not even find out about a Chapter 7 bankruptcy, unless you already are having your wages garnished. Since bankruptcy stops wage garnishments, employers will receive a notice to stop garnishing your wages. However, since the employer already knew you were under financial stress, the bankruptcy may be viewed positively because you are taking affirmative steps to put your problems behind you.
If you file for Chapter 13 bankruptcy, your employer is likely to learn about it if you have your Chapter 13 payments automatically deducted from your wages and sent to the bankruptcy court.
In either case, bankruptcy probably will not affect your current employment. It is against the law for an employer to fire you, demote you, or reduce your salary just because you filed for bankruptcy. However, bankruptcy will not protect you if the employer has other valid reasons (such as tardiness, dishonesty, or incompetence) for firing you.
Contact Us and Get Help
If you are considering filing for bankruptcy but are worried about employment, you should seek legal assistance. The experienced and compassionate Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer can provide a helping hand. We offer a free consultation to evaluate your entire financial situation and your job situation. We will make sure you are aware of all your options and help you decide on the path to a brighter future that makes sense in your individual case. We understand what you are going through and will handle every phase of the process.
Don’t delay. Contact us online or call our offices today to set up your free consultation.
