When you are struggling with debt, you start to see ads for bankruptcy attorneys everywhere. You see their commercials on TV. You see them pop up on billboards, on bus bench ads, and in the mail. It can seem like the perfect solution until someone tells you that it could hurt your career or even mean losing your job. Don’t worry; this is just another bankruptcy rumor based on rare cases. There are certain particular situations in which bankruptcy can affect employment. Still, in the majority of cases, it is not a factor, and employers who attempt to make it a factor could violate employment law.
Can I Get Fired Because I Filed Bankruptcy?
Your employer cannot fire you because you filed for bankruptcy. Bankruptcy code is federal law, and it contains most laws affecting any bankruptcy case across the nation. One provision explicitly prohibits discrimination in a variety of situations, including employment. Once hired, your employer (private or government) is not allowed to discriminate against you because you file bankruptcy. The bankruptcy cannot serve as the sole reason for a firing, demotion, reprimand, or disciplinary action.
Are There Employment Situations in Which My Bankruptcy Would be a Factor on the Job?
In right-to-work states, an employer can fire a worker for any reason (or no reason). So sometimes the issue isn’t whether or not the employer’s action was discriminatory, it’s whether or not you can prove that the employer’s action was taken as a direct response to the bankruptcy. Additionally, while bankruptcy code prohibits employers from discriminating in the workplace due to bankruptcy, there is nothing preventing employers from basing employment decisions on other factors in your credit history.
For example, if you work in the finance industries, your employer could decide that a history of late payments, settled accounts, repossessions, and charged off balances if of particular interest since your job leaves you responsible for handling company funds or client funds. In this type of situation, your employer would be unable to use the bankruptcy as a means of taking action against you in the workplace, but entirely free to base adverse employment decisions on other elements of your credit history.
Can A Bankruptcy Petitioner be Denied a Job Because They Filed Bankruptcy?
Yes. While bankruptcy code explicitly prohibits government employers from denying employment based on bankruptcy, the section addressing private employers does not include this wording. In Section 525(a), the section addressing government employment, discrimination is prohibited in virtually every aspect of government-employee relations. According to Section 525 (a), the government cannot “deny employment to, terminate the employment of, or discriminate with respect to employment against” a person who filed bankruptcy. (11. USC. § 525(a).) Private employers are addressed separately in Section 525(b), but the phrase “deny employment to” is not included. Multiple courts have considered the issue, but most have held that Congress intentionally left the phrase out. Therefore, bankruptcy code does not prevent private employers from using bankruptcy as the reason to deny employment.
Does Bankruptcy Put My Professional License in Jeopardy?
If you are a licensed professional such as a doctor, cosmetologist, lawyer, pharmacist, insurance agent, etc., you know that to qualify for your license, you were required to submit background checks and often a credit check. Bankruptcy code protects you against discrimination based on bankruptcy when applying for your license, but most professionals subject to licensing boards for renewal may be required to meet specific standards, including moral or character-based requirements. Therefore, financial matters considered “neglectful” may be seen as a factor considered by the licensing board during renewal.
Does Bankruptcy Mean Losing Security Clearance?
Filing bankruptcy does not disqualify you from a security clearance; it can actually enhance your chances of qualifying. In most cases, security clearances issued to government employees or government contractors are investigated by the DOD (Department of Defense). The investigation includes many areas of your life, including financial health (which is of particular interest). The DOD considers individuals in a precarious financial situation vulnerable, more likely to be susceptible to blackmail, and more likely to make unwise decisions or break the law to obtain money.
Debt, Bankruptcy, and Debt Protection:
Dealing with significant debt can be a considerable burden, especially when the rumor mills get going. Hopefully, you can take comfort in the fact that bankruptcy is a legal process, provided to the American people by way of the Constitution. It offers people just like you protection from debt. It is not a punishment.
If you are filing personal bankruptcy and you are worried about how it could affect your job or your career, please don’t listen to rumors. Instead, get in touch with our experienced bankruptcy attorneys to discuss your options. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one in Chattanooga with two. You are in good hands with Kenneth C. Rannick P.C.