Some think that their employers will fire them if they filed for bankruptcy. However, not only this is a big myth, this does not make any sense at all.
So, will you lose your job if you file for bankruptcy? No, you won’t, but if you’re looking for a job, private employers may refuse to hire you. Read more below why.
The Concept of Bankruptcy
It’s first important to know and understand the very concept behind bankruptcy. Bankruptcy isn’t made to pull a debtor down or give him/her a bad reputation, although sadly, filing for bankruptcy have negative reputation consequences.
But the very concept of bankruptcy is this: to help the debtor get up from his/her debts and rearrange his/her financial well-being. If we will think about it, bankruptcy is not as terrifying as we think – it can be our saving grace, however, it is best used as our last resort.
This is the reason why the thought of losing your job after filing for bankruptcy does not make sense – you even need your job more when you’re under a bankruptcy case.
Now that you know about the core concept of bankruptcy, it’s time to know your rights regarding your employment and how your employer should treat you after you filed for bankruptcy.
Employers Cannot Fire You If You File for Bankruptcy
Employers, whether private or government, are not allowed to fire you solely on the basis that you filed for a bankruptcy case. This is part of all laws protecting employees against employer discrimination.
An employer cannot fire you on the basis of:
- Filing for bankruptcy
- If you didn’t pay debts that are discharged from you
- If you were insolvent before the bankruptcy discharge
This law extends to your non-filing spouse as well – your spouse’s employer cannot fire him/her on the basis that you, his/her spouse, filed for bankruptcy.
However, an employer can still fire you for any other reason than your bankruptcy case. Just because you filed for bankruptcy does not guarantee that your employer will not fire you. If he/she has other reasons, he/she can still fire you. This is the tricky part because your employer may pretend to fire you for other reasons when his/her real reason is because you filed for bankruptcy. Later, you will learn how to spot this deceit.
Private Employers May Refuse to Hire You
Although private and government employers are restricted by law to fire you on the sole basis that you filed for bankruptcy, private employers are not restricted from hiring you if you filed for bankruptcy.
Many employers check their candidates’ credit history. This is to see how they well they organize their finances (or lack of) and how committed they are to agreements. For example, late payments are typical sign for an employer that this candidate lacks commitment to his or her obligations – and clearly, that’s a red flag for him/her.
A poor credit history is also a risk factor or theft or other related crimes on the part of the employer. That’s why they typically check these records. For these reasons, employers check their candidates’ credit history (including bankruptcy cases) – and negative performances may result on refusing to hire you. On the other side, though, keep in mind that credit score is not the only factor – so, having a bad credit doesn’t necessarily mean you won’t be hired.
If you plan to work for the government, however, law prohibits employers from not hiring you on the sole basis that you filed for bankruptcy.
How to Detect Discriminatory Acts
We mentioned before that your employer, if he/she really wants to fire you because you filed for bankruptcy, could deceive you by pretending that he/she fired you for reasons other than your bankruptcy case.
Here are some signs of such deceit:
- You are fired prior or during your bankruptcy case
- Your employer have talked to you and showed big concern over your bankruptcy case
- Your employer actually told you that he/she will fire you because you filed for bankruptcy (and later pretend they did that for other reasons)
Unfortunately, this is a tricky case, and it’s a matter of intuition and red flag signs. If you believe you were deceitfully fired because of your bankruptcy case, you can sue your employer in court.
Your employers are not allowed to fire you on the sole basis that you filed for bankruptcy, though private employers can refuse to hire you (but government employers can’t).
If you need any legal help or consultation regarding this cases, Irvine bankruptcy attorney Kevin Tang can help you with your questions and other concerns.