Filing for Bankruptcy and Your Job

Filing for bankruptcy is a drastic, but often necessary, step. It allows you the chance to clear or discharge the debts that are strangling you and start over. If you filed for bankruptcy, you were in dire economic straits, which means that the last thing you would need is to lose your job. Federal law prohibits a private employer from firing someone for declaring bankruptcy, so it is very likely that you can safely take advantage of your right to file for bankruptcy without losing your job.

Bankruptcy Is Governed by Federal Law

It is important to remember that bankruptcy is governed by federal law. Not only does that mean that you have a right to file for bankruptcy regardless of the state you live in, but also that the protection against being fired for filing bankruptcy also applies nationwide.

Private Employers May Not Discriminate

Under federal law (11 U.S.C. Section 525(b)), it is illegal for any private employer to discriminate against someone because they—or a person associated with them, such as a spouse or business partner—has filed for bankruptcy. Because this is phrased as protection against discrimination, it is even broader than a protection against being fired once you have a job. For example, private employers cannot refuse to hire you because of bankruptcy, or hire you but then not pay you as much, or not give you the same opportunities as someone who has not declared bankruptcy.

Governments Can Discriminate

The protection against being discriminated against on account of bankruptcy only applies to private employers—not the government. That means that the government (municipal, county, state and federal) is not required to offer this same protection. There are in fact certain jobs from which you may be terminated on account of filing bankruptcy (or be refused a position because of a past bankruptcy), such as the police, the armed forces and certain other government offices.

Professional Organizations and Professional Licenses

It's possible to sometimes lose your job without being fired. That's because filing for bankruptcy may be grounds for the suspension or loss of certain professional licenses. Perhaps not surprisingly, having filed for bankruptcy can impact the ability to practice law or to be a certified public accountant.

Let a Lawyer Help You

Bankruptcy is complex and affects many aspects of your life, including your livelihood in some cases. If you are contemplating bankruptcy, you should consult with a bankruptcy attorney, who can advise you as to the bankruptcy process and how to minimize its impact on you.