Most people depend on employers to survive, so it’s natural to wonder how an employer might treat your bankruptcy.
We’d love to tell you there won’t be any impact whatsoever, but the answer is a little more nuanced.
Your Current Job
Federal law prohibits employers from terminating you, demoting you, reducing your salary, or reducing your responsibilities simply because you filed for bankruptcy.
This doesn’t mean an unscrupulous employer might not try to fire you for other reasons if they find out and honestly care about your financial status. Fortunately, you are under no obligation to tell them.
Note: if you have a job with security clearance, the federal government pulls your credit constantly. Anyone whose position allows them to access classified information can have their background reviewed at any time, and credit files are under automated review. While a private employee may simply refuse to disclose their bankruptcy status, a public employee might be unable to keep it hidden.
Fortunately, the act of filing for bankruptcy is not sufficient to revoke or deny your security clearance. It may trigger an investigation, but if you have typical reasons for a financial disruption, such as divorce, your spouse’s job loss, or a medical emergency, your bankruptcy may help you. It shows that you’re dealing with the situation head-on. A person using the legal system to deal with their financial problems is unlikely to take a bribe from a foreign or criminal element.
You might have more trouble if you are simply living above your means or have a history of failing to meet financial obligations.
While Job Hunting
The Fair Credit Reporting Act allows employers to pull and check your credit before making a job offer.
There is a slight chance an employer might take a pass on you based on your bankruptcy. It’s more likely they’d do so before bankruptcy when your credit is a mess, and you have dozens of outstanding collection items. This is especially true if the employer is only checking your FICO score.
Bankruptcy raises most people’s FICO score, on average.
In addition, employers tend to care less as your bankruptcy ages.
There are exceptions. For example, if you’re looking for a job in finance or accounting or handling valuable merchandise, your bankruptcy could work against you.
Another example might be someone who must deal with a licensing board that must consider their moral fitness for a job. In that case, the board may evaluate the circumstances behind your bankruptcy before issuing a license.
As with your security clearance, bankruptcy caused by medical debt or divorce is unlikely to become a problem. Most organizations know that circumstances well beyond a person’s control could cause them to seek bankruptcy protection long enough to reorganize their finances.
When Bankruptcy is Better
Bankruptcy is almost always better than allowing your credit to continue deteriorating. Your fresh start will let you start rebuilding credit almost immediately. If your financial fitness plays a significant role in your career, you’ll be able to get your career back on track in no time.
In addition, you always have the option to explain the circumstances of your bankruptcy to an employer. Being honest and open can go a long way.
Get Help Today
Don’t let fear hold you back from attaining financial freedom.
If you need help with your bankruptcy, contact our office to schedule a case review today.
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