April 30, 2015

Job loss from bankruptcyWill I Lose My Job If I File for Bankruptcy?

The decision to file bankruptcy is a major one for any person, as doing so can result in significant consequences to his or her life. Many people who are considering filing for bankruptcy in Colorado are particularly concerned that their employer will find out, and that they will get fired for filing bankruptcy. Other individuals are also worried about losing their security clearance.

While it is completely understandable to be anxious about such concerns, the good news is that you don’t need to worry about losing your present job. The U.S. Bankruptcy Code deems it unlawful for your employer to fire you if you filed for bankruptcy.

There are, however, an increasing number of appellate court rulings that private employers be given the option to refuse an applicant who has filed for bankruptcy. In the state of Colorado, no court decision has yet been made on whether or not an employer can refuse to hire an applicant for filing.

Government Employers vs. Private Employers

According to Bankruptcy Code Section 525, government employers are prohibited from discriminating against both prospective and current employees who have filed for bankruptcy or who have failed to pay off a dischargeable debt. The Code also forbids any agency from refusing to give a person a professional license if he or she has filed for bankruptcy.

It is important to note that although a current employer is prohibited from firing you in the private sector, there is always the possibility that your future employment may be affected. The Bankruptcy Code is unclear when it comes to hiring prospective employees in the private sector. The financial industry, in particular, frowns upon debts and filing for bankruptcy. Then again, it may be rather challenging to determine if the primary reason you were not hired by a prospective employer was because of your filing bankruptcy.

When interviewing for a new job, it may be best to be open and disclose your bankruptcy if you know that they are going to do a credit or background check during the application process. They will appreciate your honesty, and doing so may give you the chance to explain your decision to file instead of being asked about it. It may likely even reflect positively on your character as it shows your potential boss that you wanted to start with a clean state financially and get rid of your debt in a legal manner.

Security Clearance

Filing bankruptcy may or may not affect your security clearance, as it depends mostly on the reasons for filing. If you work in law enforcement, for instance, bankruptcy will most likely trigger a review of your clearance. Although law enforcement agencies aren’t concerned about the actual bankruptcy, they are concerned about the reasons you may have filed—such as compulsive spending, gambling debt, and other addictive behaviors. This is because your reasons may reflect whether or not you would do something illegal to acquire money in a desperate situation.

If your job requires you to have security clearance, you may even be encouraged to file bankruptcy. After all, you may be more susceptible to accepting bribes if you have too much debt.


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