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Bankruptcy and Employment – Will Bankruptcy Affect My Job?

Bankruptcy generally should not affect your current job due to legal protections in place. The Bankruptcy Code prohibits employers from discriminating against employees who have filed for bankruptcy. It means they cannot fire, demote, or reduce your pay solely because of your bankruptcy filing. In most cases, especially with Chapter 7 bankruptcy, your employer may not even find out about your filing.

However, your employer might get to know if you have wage garnishments that need to be stopped, if you file for Chapter 13 bankruptcy requiring payroll deductions, or if you owe money to your employer. While your current job is protected, bankruptcy could potentially impact future job prospects, particularly in industries that require financial trust or security clearances.

Impact of Bankruptcy on Employment

Filing for bankruptcy can raise concerns about your current or future job. Let’s explore its impact on your current job and future job applications:

Impact of Bankruptcy on Your Current Job

Filing for bankruptcy is a significant financial decision, and it is natural to worry about how it might affect your current employment. Here’s what you need to know:

Legal Protections

Federal law protects employees from discrimination based on bankruptcy. You cannot be fired solely because you filed for bankruptcy. Due to bankruptcy, employers (both government and private) cannot change your employment terms (salary, responsibilities).

Section 525 of the Bankruptcy Code prohibits both government and private-sector employers from discriminating against employees who have filed for bankruptcy. This means they cannot fire you, demote you, reduce your pay, or otherwise change your employment terms solely because of your bankruptcy filing.

When Your Employer Might Find Out:

In most cases, especially with Chapter 7 bankruptcy, your employer won’t be notified about your filing. However, there are a few scenarios where your employer might become aware:

  1. Wage garnishment – If wages are garnished before bankruptcy, your employer will be notified to stop when the automatic stay halts collection activities.
  2. Chapter 13 bankruptcy – If your repayment plan involves payroll deductions, your employer will be notified to withhold the amount.
  3. Debt to your employer – If you list a debt owed to your employer in the filing, they’ll be notified as a creditor and instructed to stop collection attempts.

If you experience any form of retaliation or discrimination from your employer after filing for bankruptcy, it’s important to document everything and seek legal help. The National Labor Relations Act (NLRA) provides additional protection against discrimination based on financial matters, including bankruptcy.

Will Bankruptcy Affect My Future Employment?

While your current job is protected, bankruptcy may have some impact on future job prospects:

  1. Public Record – Bankruptcy becomes part of your public record and may show up on background checks.
  2. Industry Considerations – Some industries, particularly those requiring financial trust (e.g., finance, accounting), might be more cautious when hiring someone with a bankruptcy history.
  3. Government vs. Private Employers – Government jobs cannot discriminate based on bankruptcy, but private employers can choose not to hire you due to a past bankruptcy.
  4. Security Clearances – Bankruptcy generally doesn’t negatively impact your ability to obtain or maintain a security clearance. In fact, addressing your debts through bankruptcy can sometimes be viewed positively.
  5. Professional Licenses – Most professional licenses are not affected by bankruptcy, but it’s worth checking with your specific licensing board.

However, it’s important to note that bankruptcy doesn’t automatically disqualify you from any job. Many employers focus more on your skills, experience, and qualifications rather than your financial history.

Remember, a past bankruptcy isn’t automatically a bad thing. Many employers recognize that people face financial difficulties and that bankruptcy can be a responsible step toward securing a more stable financial future.

What Jobs Does Bankruptcy Affect?

It is important to understand that while bankruptcy doesn’t impact all professions equally, certain fields are more sensitive to an individual’s financial history. Here’s an overview of the jobs and industries that may be more significantly affected by bankruptcy:

Completely Prohibited Positions During Bankruptcy

Some roles are completely off-limits to individuals who are currently bankrupt. These positions include:

  1. Charity trustee
  2. Company director
  3. Insolvency practitioner
  4. Justice of the peace
  5. Registrar of births, marriages, and deaths
  6. MOT authorized examiner
  7. Consumer credit license holder

If bankruptcy restrictions are extended, individuals may be lined from:

  • Local or national government positions (e.g., councilor or MP)
  • School governor roles
  • Magistrate positions

Financial Sector Jobs

The financial industry is particularly sensitive to bankruptcy history due to the nature of handling money and financial responsibilities. This includes positions such as:

  1. Accountants
  2. Financial advisors
  3. Mortgage brokers
  4. Stockbrokers
  5. Bank tellers and managers

These roles often require a high level of financial responsibility and trust. That’s why the history of bankruptcy is a potential concern for employers.

Legal Professions

The legal field can be particularly sensitive to bankruptcy. This includes:

  1. Solicitors
  2. Legal executives
  3. Paralegals

Many bar associations have strict guidelines regarding the financial standing of their members.

Government and Public Service Roles

Certain public service positions may be affected, including:

  1. Elected officials (e.g., MPs, councilors)
  2. Magistrates
  3. School governors
  4. Registrars of births, marriages, and deaths

Security and Law Enforcement

Jobs requiring high levels of trust and security clearance can be impacted:

  1. Police officers
  2. Armed forces personnel
  3. Security guards
  4. Positions requiring security clearances

Regulatory and Oversight Positions

Some specialized roles are explicitly restricted for individuals in bankruptcy:

  1. Insolvency practitioners
  2. Charity trustees
  3. Company directors
  4. Consumer credit license holders

Licensed Professions

Various licensed professions may have restrictions or additional scrutiny:

  1. Medical professionals (doctors, dentists)
  2. Real estate agents and property managers
  3. Pub licensees
  4. MOT authorized examiners

It is important to note that the impact of bankruptcy on these professions can vary. Some may face outright restrictions during the bankruptcy period, while others may experience increased scrutiny or potential limitations. The duration of these effects often depends on whether an individual is an undischarged bankrupt or has been discharged.

For many other professions, bankruptcy may have little to no direct impact on employment. While bankruptcy can affect certain jobs more than others, it doesn’t necessarily mean permanent career limitations.

It’s important to note that the specific restrictions and regulations can vary, depending on location. Some countries might not have the same limitations on holding public office after bankruptcy.

Discrimination Laws and Bankruptcy

Federal law bans government and private-sector employers from discriminating against those who have filed for bankruptcy protection. The U.S. Bankruptcy Code prohibits discrimination against debtors who have filed for bankruptcy. This applies to both government agencies and private employers.

Government Agencies

Government employers at federal, state, and local levels cannot deny employment, terminate employment, or discriminate in any way against potential or current employees based on their bankruptcy status.

Private-Sector Employers

Private employers are prohibited from terminating employment or discriminating against employees who have filed for bankruptcy. However, the law does not explicitly prevent private employers from denying employment to job applicants based on bankruptcy history.

If you believe an employer has discriminated against you due to your bankruptcy filing, it’s important to document the situation. While proving discrimination can be challenging, consulting with an employment law attorney may help determine if there’s evidence of wrongdoing and if you have grounds for a wrongful termination claim.

Can You Be Fired for Filing Bankruptcy?

No, you cannot be legally fired solely for filing bankruptcy. Federal law, specifically Section 525 of the Bankruptcy Code, protects employees from discrimination based on bankruptcy filings. This applies to both government and private-sector employers.

Your employer is prohibited from firing, demoting, reducing your pay, or changing your employment terms solely because you filed for bankruptcy. These protections apply to both government and private sector jobs.

Can Employers Fire Me or Reject My Job Application Because of My Bankruptcy?

Employers cannot fire you because of your bankruptcy filing. For job applications, government employers cannot reject you based on bankruptcy. However, private-sector employers may consider bankruptcy in hiring decisions, especially for finance-related positions.

If you experience discrimination due to bankruptcy, document it and seek legal help. While the law strongly protects against bankruptcy-based discrimination in employment, its application can vary, particularly in private-sector hiring processes.


Bankruptcy impacts employment, but legal protections exist. Federal law shields your current job from discrimination. Future job prospects may face challenges in some industries. Government jobs can’t discriminate based on bankruptcy. Private employers have more hiring flexibility. Finance and law professions may be more sensitive to bankruptcy history. Most jobs don’t automatically disqualify candidates with bankruptcy. Many employers prioritize skills and qualifications. Bankruptcy can be a responsible step toward financial stability. Know your rights and potential impacts. This knowledge will help you navigate your post-bankruptcy career effectively.


Will I lose my job if I go bankrupt?

No, federal law prohibits employers from firing you solely for filing bankruptcy.

Can I Lose My Job If I File Chapter 7 Bankruptcy?

No, you cannot legally be fired just for filing Chapter 7 bankruptcy.

Will My Employer Know If I File Chapter 13 Bankruptcy?

Your employer may find out if wage garnishment is involved or if they’re listed as a creditor.

Will the bankruptcy court publish a filing?

Yes, bankruptcy filings are public records but aren’t typically publicized.

Will the bankruptcy trustee contact an employer?

Generally no, unless wage garnishment or employer-related debts are involved.

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