Many people worry about finding employment after filing for bankruptcy. They might also be wondering what to do if their employer files for bankruptcy.
In today’s blog, Groce & DeArmon answers your questions by giving you a complete guide to bankruptcy and employment.
What if my employer goes bankrupt?
If you’re an employee and your company declares bankruptcy, but you’re still owed wages, vacation pay, sick pay, severance pay, or other benefits, you become a creditor to the company.
You must — sooner than later — submit a Proof of Claim form with the bankruptcy court where your employer’s case is pending or send the form to the claims agent of the company.
When can I submit my Proof of Claim?
Naturally, the sooner the better. You can submit your claim any time, even during the automatic stay for your company.
An automatic stay is a statutory injunction that prevents creditors from collecting debts or suing against the company for a short grace period.
Can bankruptcy impact employment?
No. Your employer cannot reduce responsibilities, dock your pay, demote you, or fire you due to bankruptcy.
The US Bankruptcy Code, Section 525, prevents this. Being fired or denied a position can be due to other things, like poor attendance and lack of prior experience.
Many courts interpret this section to mean that it only applies to public companies (federal, state, or local government entities), but not to private employers.
Will my current or future employer know about my bankruptcy?
Your current or future employer does not need to be made aware of it and likely won’t find out. Federal law protects debtors from employment discrimination. Your future job prospects won’t be affected.
There are exceptions, however. Here are just a few.
Making Chapter 13 Payments
If you file for Chapter 13 bankruptcy, your employer will likely know (at least the payroll department will). The court may order your payments to be auto-deducted from your wages and sent to the bankruptcy court.
In this case, your employer will then need to ensure you make your payments. This only applies to some jurisdictions, not all.
Stopping a Wage Garnishment
Another way an employer can find out about your bankruptcy is if you decide to file for bankruptcy to stop wage garnishment since an employer must receive notice of the bankruptcy to stop it.
Wage garnishment can happen after a credit company files suit, obtains a judgment, and begins automatically collecting from your paycheck.
Related Post: Wage Garnishment and Missouri Law
If your bankruptcy is brought up during a job interview.
Although unlikely, should your bankruptcy or debt come up during a job interview, frame it as a learning experience and explain the issue. Many Americans struggle with debts, be it student loans, credit cards, or personal loans.
What if my bankruptcy is used against me during hiring?
Unfortunately, discrimination can and does still occur. If you experience it, the best course of action is to contact an experienced employment attorney that will help examine your case and find evidence of wrongdoing for a countersuit.
How does bankruptcy affect my employment opportunities?
For the most part, it won’t. However, it largely depends on what sector and job you are applying for. Government agencies like the CIA, NSA, and FBI don’t accept those with bankruptcies on their credit reports.
Related Post: Will Bankruptcy Keep Me from Getting a Job?
Government agencies view your bankruptcy as a potential risk, thinking you’ll exchange government secrets for financial solvency.
Other employers run a credit check but need your permission to do so. If they’re hiring for jobs that have to do with bookkeeping, accounting, payroll, and money handling, a bankruptcy can serve as a barrier to entry.
Can filing for bankruptcy stop credit card debt?
Yes, it can stop the credit card companies from bothering you with frequent calls and solicitations for repayment. You also get the opportunity to form a repayment plan that works for you.
Find Expert Legal Help for your Bankruptcy at Groce & DeArmon
Our experienced staff of bankruptcy attorneys are here to help you maneuver through this difficult time. Contact us for a free quote today.