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Will your boss find out about your bankruptcy?

On Behalf of | Aug 14, 2023 | Personal Bankruptcy

Financial struggles are a part of life for most people, and bankruptcy is a legal solution that provides relief to many who find themselves with overwhelming debt.

While bankruptcy can offer you a fresh financial start, it’s not uncommon for people to worry about the potential impact filing for relief can have on their professional lives. Here are a few pieces of information that might help ease your concerns.

Most employers never know about it

It’s true that bankruptcy filings are a matter of public record, so anybody who really wants to know (and knows how to look) can find out about your situation. However, the court isn’t going to directly notify your employer about your filing unless it has a good reason.

Usually, there are only two reasons that the court might notify your employer about a bankruptcy petition:

  • Your wages are already being garnished by a creditor: Once your bankruptcy petition is filed, an automatic “stay” goes into effect that prohibits most collection actions. If your pay is being garnished for something like an unpaid medical bill, your employer may be notified so they can stop the withholding.
  • You file for a Chapter 13 reorganization plan: Once you begin making payments to your creditors through a court-ordered plan, the money will typically be deducted directly from your paycheck. Your employer would need to be notified so that they can comply.

In some situations, especially if you work in the financial industry or have a security clearance, you may be contractually obligated to inform your employer about the bankruptcy, but that doesn’t mean it will negatively affect your career. Bankruptcy can be seen as a proactive and positive method of dealing with debt that makes you less of a security risk than just continuing to struggle with your bills.

Finally, it’s against the law for an employer to discriminate against you for exercising your legal right to file for bankruptcy.

If you’re drowning in debt, there are ways to address the issue. Learning more about how bankruptcy works may ultimately make it easier to decide if/when it is time to file.


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