Can filing for bankruptcy affect my employment?

| Nov 6, 2020 | Employment Law |

Filing bankruptcy is a constitutionally guaranteed right under federal law. Many resist the idea, but filing under Chapter 7 or Chapter 13 is a legal and effective way to get back on sound financial footing after accumulating an overwhelming amount of debt. While many people in debt might worry about the stigma of filing bankruptcy, others worry more about how filing might impact their employment.

However, workers who do file bankruptcy are protected from discrimination under federal bankruptcy law. The law prohibits employers from denying bonuses to employees and dismissing, laying off or demoting workers solely because they filed Chapter 7 or Chapter 13 bankruptcy.

In addition, the federal government cannot deny, suspend, revoke or refuse a bankruptcy filer’s license, charter or franchise just because they filed for bankruptcy. The government cannot deny a filer’s ability to work. A notable exception to this rule exists for employees who apply for or have federal security clearance.

What about when applying for a new job?

Most employers do not perform a credit check before hiring a new employee. However, the Bankruptcy Code allows private employers to deny applicants employment based on their credit history.

Some employers routinely check employees’ credit scores as a condition of employment and might be more likely to check applicants’ credit ratings as well. Employers may also check applicants’ credit scores if the job responsibilities involve managing finances.

Employers may try to find a way around federal protection

Massachusetts is an “at-will” employment state. This means that an owner or manager can dismiss employees for no reason at all or for any reason they deem appropriate, so long as the decision is not rooted in discrimination based on gender, race, religion, bankruptcy status and other factors.

If an employee has evidence that their job dismissal was due to a personal bankruptcy filing, then they may be able to take their employer to court for wrongful termination. Common examples of evidence that can be presented in court include emails, voicemails and texts.

Every employee’s circumstances are different, so it is always best to discuss the individual details of a case with an experienced employment law attorney.