How Will Chapter 7 Affect My Employment?

Jonathan Petts

Jonathan Petts - Executive Director
August 3, 2018

Looking for chapter 7 bankruptcy assistance?

How will Chapter 7 Bankruptcy Affect My Employment?

how-will-bankruptcy-affect-my-employment(cook) 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?

how-will-bankruptcy-effect-my-employment(food truck)

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 your are 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 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.

Will a Potential Employer Find Out About My Bankruptcy?

how-will-bankruptcy-affect-my-employment(man in kitchen)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.


You cannot be fired simply because you filed for bankruptcy. In fact, employers usually don’t learn about it.

But, a bankruptcy filing can be seen 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 need 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.

Kisha smilingAnne smilingPatricia smiling
Hundreds got their fresh start! So can you!
I prefer one-on-one assistance

Questions about bankruptcy?

Research and understand your options with our articles and guides.

Go to Learning Center →
Questions about Upsolve?
Read Support Articles →

Upsolve is a 501(c)(3) legal aid nonprofit that started in 2016. Our mission is to help low-income Americans in financial distress get a fresh start through Chapter 7 bankruptcy at no cost. We do this by combining the power of technology with attorneys. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have mission-driven funders that include the U.S. government, former Google CEO Eric Schmidt, and private charities.

To learn more, read our reviews from past clients, or read our press coverage.

Considering Bankruptcy?

Upsolve helps low-income Americans file bankruptcy on their own for free. Are you interested in our free service or would you like a free consultation with a paid attorney?

Chat with an Expert for Free