Many people who are considering filing bankruptcy ask the question, “Can I lose my job if I file for bankruptcy?” The short answer is “no” the debtor cannot lose his or her job if the debtor files for Chapter 7 or Chapter 13 bankruptcy. Section 525(b) of the Bankruptcy Code deals with private (non-government) employers. This code section clearly states, “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…”
Section 525 states that employers cannot terminate employees or even discriminate against them if they have filed for bankruptcy protection. Section 525 of the Bankruptcy Code also states that no governmental agency can terminate or discriminate against government employees who file for bankruptcy protection.
Many people worry about employers discovering that they have filed for bankruptcy protection. When people file for bankruptcy, it is a matter of public record. This means that these records are public documents that anyone could potentially access. Even so, very few people will go through the trouble of checking court records to see if the an individual has filed bankruptcy. Most employers will never know that an employee has filed for bankruptcy.
If the debtor works in a field where the employer requires a credit check as part of the hiring process, the bankruptcy will show up on the credit report. The bankruptcy filing can have a negative impact on the debtor’s credit score. However, if the debtor is in a position where he or she needs to file for bankruptcy, the debtor may already have a number of collections and law suits against him or her, so the debtor’s credit score may already be poor. Some employers factor in credit scores into their hiring decisions. However, employers are still prohibited by law from discriminating against people who have filed for bankruptcy and from terminating people who have already been hired.