Declaring bankruptcy will have far-reaching consequences, including on your credit score and ability to borrow money in the future. It’s natural for folks to worry about how declaring bankruptcy would influence their job security as they weigh the pros and drawbacks of this major life decision. 

Those considering bankruptcy because they have accrued too much debt and cannot pay it off in a reasonable time frame should be certain that doing so will not adversely affect their employment prospects. Consider taking help from lawyers at Benenati Law Firm.

Will It Get Around to Work?

Employers can’t act against you based on a bankruptcy filing unless they know about it. The bankruptcy type you file and how your payments are set up will determine whether or not your employer will find out that you have declared bankruptcy.

Filing for Chapter 7 bankruptcy is a legal process in open court and is thus accessible to the general public. The creditors on your list will be notified of your bankruptcy filing under this chapter. Creditors must be given ample time to review the notice and file any appropriate challenges before any debts are forgiven. Unless you have a debt to your employer, they do not need to be included. Even though the details of a Chapter 7 bankruptcy case are available to the public, few companies really take the initiative to research their current employees’ backgrounds in this way.

The court still handles bankruptcies filed under Chapter 13, but they differ greatly from Chapter 7. Debt is reorganised into a payment schedule instead of being written off. Paycheck garnishment is a legal process that can occur when a borrower is ordered to pay a creditor. Your employer will find out about the bankruptcy since they must deduct the amount in a court order.

Legal Discrimination in the Bankruptcy Process

Bankruptcy proceedings in the United States are governed by Section 525 of the United States Code. It is against the law for an employer to treat employees differently because they have gone through bankruptcy. While the law makes it plain that such discrimination is prohibited, this does not guarantee that all businesses will stop engaging in it. In some cases, employers break the law, and proving this can be difficult.

When a company terminates an employee or takes other disciplinary action against them because they have filed for bankruptcy, they will typically cite some other reason. As a result, it may be challenging to establish that the employer’s acts were unlawfully discriminatory.

By Manali