Ready to say goodbye to student loan debt for good? Learn More
X

How Will Chapter 7 Affect My Employment?

2 minute read Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool


In a Nutshell

You cannot be fired simply because you filed for bankruptcy. In fact, employers usually don’t learn about it and it is illegal for an employer to discriminate based on your past filing history.

Written by Jonathan Petts
Updated July 22, 2020


A common question we hear when people are considering filing for bankruptcy is “will this have any effect on my job? Alternatively, if you’re looking for a job, will filing have any effect on your chances of landing one? This article will answer those questions for you.

Will you Lose Your Job?

If I file for Chapter 7 bankruptcy, will my boss find out about my bankruptcy? The answer is probably not. Normally only your creditors are informed about your case. There is no reason why your employer would be informed and in most cases employers don’t find out. 

One exception is if your wages are being garnished by a creditor.  In that case, the creditor should stop the garnishment as soon as they are notified of the bankruptcy by your attorney. But you or your lawyer may also want to notify your company’s payroll office about your filing to stop the garnishment immediately. And in that case, your employer would find out. 

But in reality, that’s usually not a big deal. Your employer is already aware of your debt problems because they have to process your garnishment each payday. So in reality, filing for bankruptcy may show that you’re taking steps to put your finances in order. 

And if your employer does find out about your bankruptcy, they are legally prohibited from firing you because of it. The U.S. Bankruptcy Code’s anti-discrimination section states that no employer can “terminate the employment of, or discriminate with respect to employment against” “an individual who is or has been a debtor” in bankruptcy. That means your employer is also prohibited from reducing your pay or demoting you because of your bankruptcy filing. 

It’s important to understand that the Bankruptcy Code only makes termination or discrimination illegal if done “solely” because of your bankruptcy filing. So, bankruptcy won’t prevent you from being fired or demoted if you are bad at your job. 

Upsolve Member Experiences

1,950+ Members Online
Hossein Nasrollahi
Hossein Nasrollahi
★★★★★ 7 hours ago
great job and free
Read more Google reviews ⇾
Jamie Lair
Jamie Lair
★★★★★ 1 day ago
Upsolve guided me through the process for my Chapter 7 bankruptcy. I couldn't have done it without them. Thanks Upsolve!!!!!!!!!!
Read more Google reviews ⇾
V Hattabaugh
V Hattabaugh
★★★★★ 1 day ago
I'm grateful for Upsolve!
Read more Google reviews ⇾

Will a Potential Employer Find Out About My Bankruptcy?

If you’re applying for jobs, will your potential employer find out that I filed for bankruptcy in the past? Usually yes. Potential employers often check a job applicant’s credit, especially when a job involves cash, accounting, or valuable merchandise. 

So what happens if a potential employer sees a bankruptcy on your credit report? It’s something you should be prepared to explain - you had financial troubles and needed to take action to get your finances in order. A bankruptcy obviously isn’t the best sign for an employer. And although it’s illegal for an employer not to hire you because you filed bankruptcy, it is ok for them to consider poor credit and similar factors related to bankruptcy. 

That said, a job applicant with a bankruptcy filing may often be more attractive to an employer than the alternative: a job applicant still buried in debt with poor credit. That type of financially distressed applicant is likely viewed as a greater risk for many employers than one who used bankruptcy to obtain a fresh start. Because they are still saddled with debt. 

Conclusion

You can’t be fired simply because you filed for bankruptcy. In fact, employers usually don’t learn about it. But, a bankruptcy filing can be discovered by future employers. If you're applying for a new job, it’s best to be honest about this fact and explain the truth - you needed a fresh start to get your personal finances in order so that you can focus on your work and be the most productive employee possible going forward.



Written By:

Jonathan Petts

LinkedIn

Jonathan Petts has over 10 years of experience in bankruptcy and is co-founder and CEO of Upsolve. Attorney Petts has an LLM in Bankruptcy from St. John's University, clerked for two federal bankruptcy judges, and worked at two top New York City law firms specializing in bankrupt... read more about Jonathan Petts

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener to see if Upsolve is right for you.

Take Screener
13,391 families have filed with Upsolve! ☆
or

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →
Y-Combinator

Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can't access their basic rights when they can't afford to pay for help. Combining direct services and advocacy, we're fighting this injustice.

To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.