In my experience, individuals, especially those in finance or high-profile positions, often hesitate to file for bankruptcy due to the social stigma attached. There’s a widespread fear of potential job termination if employers discover the bankruptcy, leading to concerns about missed job opportunities. While bankruptcy should not be a permanent mark on your record, occasional negative perceptions persist. In this blog post, I will explore the laws surrounding bankruptcy discrimination, shedding light on existing protections and addressing societal stigmas.
Bankruptcy and Job Prospects: Understanding Your Rights
The Federal Bankruptcy Code, specifically 11 U.S. Code § 525, provides protection against discriminatory treatment in hiring based on bankruptcy status. For public employers, this safeguard is comprehensive, preventing discrimination solely due to bankruptcy. However, the term “solely” emphasizes that bankruptcy status can be a factor in public employment decisions, but it cannot be the exclusive reason for denial. Private employers, on the other hand, have the discretion to consider past bankruptcies when making hiring decisions.
Insights from Personal Experience: Bankruptcy in Specialized Workplaces
Drawing from my experience, challenges related to bankruptcy and employment are relatively rare, typically arising in settings with classified clearances or highly technological workplaces. Intriguingly, in government and military positions where concerns about coercion exist, having discharged debts through bankruptcy can sometimes be an advantage. Being debt-free becomes a positive factor in evaluating the potential for compromise or bribery.
Navigating Private Employment and Bankruptcy Records
Once bankruptcy is filed, it becomes part of background checks, credit reports, and court records. Private employers, unlike government entities, can choose not to hire based on past bankruptcy filings. Although not all employers automatically reject candidates due to bankruptcy, concerns may arise, especially for roles involving financial responsibilities.
Employment Protections: Your Rights After Filing for Bankruptcy
Legally, your employer, whether public or private, cannot terminate your employment solely based on your bankruptcy filing. This protection extends to negative actions such as salary reductions, demotions, title changes, or creating a hostile work environment. It’s crucial to note that these protections come into effect only after officially filing for bankruptcy, not upon informing your employer of your intention to file.
Disclosure Concerns and Employer Discoverability
While there’s no obligation to inform your employer about your bankruptcy filing, certain scenarios may lead to discovery:
- Wage garnishment notifications due to your bankruptcy filing.
- Routine employer checks on public records for bankruptcy filings.
- Professional license obligations, particularly in the financial industry.
- Outstanding debts to your employer, resulting in creditor notification during bankruptcy.
Can the Government Deny Benefits Because of Bankruptcy?
And finally, government agencies cannot deny certain public benefits based on a bankruptcy filing. The following public services are protected:
- Public Benefits: This includes welfare, food stamps, and unemployment.
- Public Housing: Protections extend to programs such as HUD’s Section 8 Program.
- Licenses: Your ability to obtain licenses, like driver’s licenses and liquor licenses, is not affected.
- Government Student Loan Programs or Mortgage Finance Programs: Participation in these programs remains unaffected.
Considering Bankruptcy: A Personal Decision
The decision to file for bankruptcy is personal. Although a bankruptcy record stays on your credit report for up to 10 years, rebuilding a credit score into the 600s within two years is often achievable. Additionally, weighing the potential costs of not filing, including lawsuits, wage garnishments, deficiency judgments and other legal issues, is essential. In many cases, I think the risks of not filing may outweigh the rewards.
