One of the most common concerns my clients have is whether or not filing a bankruptcy case will affect their job. The short answer is this; no, filing a case should not have any impact.
The Bankruptcy Code at 11 U.S.C. §525 specifically prohibits employers from discriminating against any person who has filed for bankruptcy relief. Your employer would be breaking a federal law if they fire you or discriminate against you as a result of your bankruptcy.
Protection Against Discriminatory Treatment
(a) Except as provided in the Perishable Agricultural Commodities Act, 1930, the Packers and Stockyards Act, 1921, and section 1 of the Act entitled “An Act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1944, and for other purposes,” approved July 12, 1943, a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.
(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
Will My Employer Find out About My Bankruptcy Case?
It is very unlikely that your employer would ever know that you’ve filed bankruptcy if you file a Chapter 7 case. Chapter 7 is the most common kind of case that is filed nationwide.
In Chapter 7, the court will require you to disclose where you are working and your income, but as long as you provide that information then there would be no reason for the court to ever contact your employer.
In Chapter 13 cases, it is not unusual for the employer’s payroll department to find out that a person has filed bankruptcy. Chapter 13 cases allow you to consolidate your debts into a payment plan that is managed by the court.
In the majority of Chapter 13 cases, the person who files a Chapter 13 case will make payments on their case through a payroll deduction. The Bankruptcy Court or Trustee can send the necessary information to your payroll department and they will automatically deduct your Chapter 13 plan payments the same way they deduct your income taxes or health insurance.
A Payroll Deduction issued by a Chapter 13 Trustee is NOT a garnishment. It is a completely different legal document that orders the employer to deduct a set amount from your pay and remit it at least monthly to your Trustee.
Bankruptcy is More Common than One Might Think
Bankruptcy is a common enough occurrence that, for most businesses, dealing with bankruptcy is just a part of regular day-to-day accounting. Any employer that withholds payroll taxes from your paycheck will have the capability of withholding a Chapter 13 payment. Furthermore, Chapter 13 cases that have a payroll deduction in place are statistically more likely to be successfully completed!
On another note, if you file a bankruptcy and have ANY kind of security clearance, we absolutely advise full disclosure to your Facilities Security Officer (FSO) at the time you file your Bankruptcy case. In many situations where a security clearance is involved and required for employment, we strongly recommend the filing of a Chapter 13 Debt Consolidation if at all possible.
You Cannot Be Fired Solely for Filing Bankruptcy
The Bankruptcy Code states that no private or government employer can penalize you for filing any form of bankruptcy. Of course, employment laws vary from state to state.
However, your employer cannot terminate you solely for filing bankruptcy as this would be in violation of federal law, nor can your current employer penalize you in any way, to include salary reduction or demotion.
Let Us Help You Through the Bankruptcy Process?
As you can see, bankruptcy laws are very complicated and if you owe any debt of any kind and are wondering how to deal with it, please contact us to schedule an appointment for a free initial consultation.
We can answer all your questions regarding Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, stopping a foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging medical debt, personal loans, payday loans, credit card debt, etc. We can alleviate your stress! We want to help and we can help you!
Alabama State Bar requires the following: “No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.”
Bond, Botes, Sykstus, Tanner & McNutt, P.C.
102 South Court St, Suite 314, Florence, AL 35630
Phone: 256-760-1010 • Fax: 256-760-1023
Office Hours: Monday – Friday • 8am to 5pm
No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.