Although many negative connotations are associated with declaring bankruptcy, it’s often an excellent opportunity for people to get out of debt and explore financial freedom.
However, if you are considering bankruptcy, one of your top concerns could be how a bankruptcy declaration will affect your employment and ability to earn a living. Before you file, here are some of the most important things you need to remember.
What are the Types of Bankruptcy and What Do They Do?
Multiple types of bankruptcy may be a good fit for you, depending on your financial situation and the specifics of your case. These types of bankruptcy include:
- Chapter 13 bankruptcy – Chapter 13 bankruptcy is one of the top options for anyone hoping to pay off their debts, retain most of their property, and discharge qualifying debts over time. In most cases, you will have five years to pay off your debt. According to your repayment plan, any remaining debts will be discharged once those five years are up.
- Chapter 11 bankruptcy – Chapter 11 bankruptcy is a good option for business owners hoping to keep their doors open despite their bankruptcy declaration. With Chapter 11 bankruptcy, you can keep your business afloat, repay your creditors, and get back on track financially.
- Chapter 7 bankruptcy – Chapter 7 bankruptcy occurs when you sell your assets to cover your debts. Any qualifying debts will be discharged, while your remaining debts will be paid with the funds raised by selling your assets. Chapter 7 bankruptcy often has income restrictions, which makes Chapter 13 a more viable option in many cases.
Can Bankruptcy Affect My Job?
After you’ve declared bankruptcy, you might expect your life to improve. You might still worry that your declaration might hurt your job. Under state and federal laws, your employer does not have the right to discriminate against you when you have decided to declare bankruptcy. Your employer will often not even know you have declared bankruptcy.
However, if you suspect your employer has discovered your bankruptcy and faced any adverse action at work because of it, you may be entitled to compensation for your suffering. Examples of discrimination for bankruptcy declarations could include:
- Wrongful termination
- Having your hours cut
- Having your schedule suddenly changed
- Having your pay reduced
- Job responsibilities being taken away
Employers who take adverse action against employees for declaring bankruptcy may violate state and federal employment laws. If this happens, you may have the opportunity to take legal action against them.
How Would My Employer Find Out About My Declaration of Bankruptcy?
In many cases, employers never find out about their employees declaring bankruptcy. However, there are some cases where your employer could find out that you have decided to move forward with a bankruptcy declaration.
In filing a Chapter 13 bankruptcy declaration, your employer may be notified that you have declared bankruptcy because your payments to your creditors will be deducted directly from your paycheck under a court order. The same cannot be said for Chapter 7 bankruptcy declarations, which do not involve any repayment plan.
What Does Bankruptcy Mean for Future Jobs?
Even though companies are prohibited from retaliating against employees who choose bankruptcy, that does not mean that there are no potential risks for your employment opportunities in the future after a bankruptcy declaration.
When working with private companies, you may be at an increased risk of being passed over for job opportunities due to a previous bankruptcy declaration. There are many reasons why companies may prefer employees who have not previously declared bankruptcy.
They may have concerns that you are financially irresponsible or worry that you are not an ideal candidate to handle the company’s payroll, valuable merchandise, or other assets.
Unfortunately, if you are hoping to avoid being passed over for a job opportunity by refusing to give your permission for a potential employer to check your credit score and report, this could mean the company refuses to hire you.
They also give you other reasons why they have decided to go with another candidate or not hire you. However, your employment law attorney can thoroughly investigate whether these were simply excuses.
Do Bankruptcy Cases have Special Considerations?
There are specific considerations for individuals who have declared bankruptcy but still need a security clearance. Certain jobs require security clearance, meaning your employer will need to verify your identity, run a background check, and check your credit report and score.
However, a bankruptcy declaration does not necessarily mean you will be passed over. Instead, if you are proactive in explaining your bankruptcy filings with your potential employer, this could signal to the company that you possess good moral character.
A bankruptcy attorney can help you show that you were not financially irresponsible but that your bankruptcy declaration was out of necessity, such as through exorbitant medical bills or a devastating divorce.
Call the Cleveland Bankruptcy Attorneys with Cleveland Bankruptcy Attorneys
If you have concerns that you may be at risk of discrimination or are wondering whether a bankruptcy declaration is a good fit for you, reach out to our experienced Cleveland Bankruptcy Attorneys at Cleveland Bankruptcy Attorneys, LLP. We’ll bring our proven track record of success and answer any questions and concerns you may have about bankruptcy and employment.
You can learn more about how discrimination laws work and what information will be made public when you contact our office for a free consultation. You can reach us through our convenient contact form or by phone at (216) 586-6600 to schedule yours today.