It’s a common concern for individuals considering bankruptcy—whether or not their employer can fire them for filing. The short answer is: No, your employer cannot legally fire you for filing bankruptcy. Here’s why:

Legal Protection Against Employment Discrimination

Federal law protects employees from being fired, demoted, or discriminated against due to filing for bankruptcy. Specifically, under 11 U.S.C. § 525 of the Bankruptcy Code, it is illegal for an employer to discriminate against an employee for filing a bankruptcy petition. If your employer were to fire you solely because of your bankruptcy, it would be considered discriminatory and a violation of your rights.

When Might Your Employer Know About Your Bankruptcy?

Chapter 7 Bankruptcy:

  • Generally, your employer will not know about your bankruptcy filing. Chapter 7 is typically a quicker process, and unless:
    • You are already being garnished by creditors, your employer will need to stop those wage garnishments upon your bankruptcy filing.
    • Your employer is one of your creditors, they may receive notice of the filing.
    • Your employer runs random credit checks on employees.

For most people filing Chapter 7, there is no reason for an employer to be involved or notified.

Chapter 13 Bankruptcy:

  • Chapter 13 is a longer process (usually 3–5 years), and there may be a higher likelihood that your employer finds out. The reasons could include:
    • Wage garnishments: If your wages were being garnished before your bankruptcy filing, your employer will need to stop the garnishments once your bankruptcy case is filed.
    • Notice to your employer: If your employer is one of your creditors, they will receive direct notice of the bankruptcy.
    • Income Withholding Order (IWO): In Chapter 13, you may request that your bankruptcy payments be deducted directly from your paycheck. If you do this, your employer will become aware of your bankruptcy filing.
    • Credit Checks: If your employer runs random credit checks or provides a business credit card, they may find out about your filing.

Why Employers Might Not Mind If You File for Bankruptcy

It might seem counterintuitive, but filing for bankruptcy can sometimes reduce the perceived risk an employer has about your financial situation. If you’re facing financial struggles and mounting debt, employers might view that as a potential issue affecting your work performance. However, by filing for bankruptcy, you may be seen as taking steps to resolve your debt, which can lower that perceived risk.

Conclusion:

While filing for bankruptcy can feel overwhelming, especially when considering how it might affect your job, the reality is that your employer cannot fire you just because you filed. With legal protections in place, filing for bankruptcy may even help alleviate some of the financial strain you’re under, allowing you to be a more focused and productive employee. If you’re still worried, discussing the situation with our office can give you further peace of mind and guidance on how to navigate the process.