Can a personal bankruptcy prevent you from getting a job?

It is hard times that force an individual into personal bankruptcy. But bankruptcy itself exists to give people a chance to climb out of those financial troubles. Surrendering some assets in exchange for wiping out most of your debts is supposed to grant you a fresh start at life, so you can learn from your troubles or mistakes and begin building a relatively more secure and prosperous future.

If, in such a situation, you end up without a source of income, wouldn’t it defeat that purpose of the bankruptcy process? Hence, our nation’s lawmakers put in a safeguard against discriminatory treatment on the basis of personal bankruptcy.

Section 525 of Title 11 of the United States Code specifically states that neither governmental units nor private employers may deny employment to or terminate the employment of a person solely because he or she has filed for bankruptcy.

So, if you have a job, you cannot be fired just because you filed for personal bankruptcy, and if you don’t have a job, a prospective employer cannot turn down your application just because you have filed for bankruptcy.

That is what the law says. In reality, however, the sad part is that if an employer wants to discriminate against you because of your bankrupt status, they can just do so by citing some other reason. They can suddenly start picking on anything like your work performance or your communication skill or your qualifications or your general behavior etc to justify their step.

But if you do believe that your bankruptcy was the cause, you can sue them, but you will have to prove that the employer fired you or didn’t give you a job only because you are bankrupt and not for some other reason.

Do note that you are not required to report your bankruptcy filing to your employer unless he or she is listed as a creditor in your filing or there are some wage deductions that have to be made under your chapter 13 agreement. You will need to notify your employer to stop wage garnishments after you file for bankruptcy though.

The fact is that your bankruptcy filing goes onto your credit report, which can be accessed by your employer. And potential employers nowadays routinely look at credit reports as part of their background checks. So your personal bankruptcy will not be a secret from them. You should, however, keep an eye on your credit reports to ensure they don’t contain false information.

Though prospective employers do shun individuals with poor financial history, its effect largely depends on the job profile you are applying for. Work that requires fiscal responsibility or where you handle money might be harder to get, whereas some other job profile like a lecturer’s or an engineer’s shouldn’t see that much impact.

Usually, being honest and having a frank chat with the current or prospective employer about why you ended up filing for bankruptcy should help you considering the reason for bankruptcy is not always financial irresponsibility.