Should You Tell Your Employer About Your Bankruptcy?

You just filed for bankruptcy. The relief is real, but so is the worry. Many people wonder if they need to inform their employer that they’ve filed. In general, this is a complicated subject, but it’s important to know that:

• In most cases, you are not required to tell your employer you filed for bankruptcy.
• Bankruptcy filings are public records, but employers usually avoid searching for them.
• Federal law protects you from being fired simply because you filed for bankruptcy.
• Wage garnishment from a Chapter 13 plan may require your employer to be notified.
• Certain government jobs and security-clearance positions may involve additional disclosure considerations.

Here at Whitten & Whitten, our team is happy to take your call and answer any of your questions. We’re ready to walk you through the process of your bankruptcy, so you can have peace of mind.

Are You Legally Required to Tell Your Employer About Your Bankruptcy?

There is no law that requires you to disclose a bankruptcy filing to your current employer. The bankruptcy process runs through the federal court system, not through your workplace. Your employer does not receive a notification in the mail. They are not contacted by a trustee. Unless something specific in your case brings your employer into the picture, they simply will not know.

That said, bankruptcy filings are part of the public record. A determined employer could theoretically search for this information, but in practice, most employers never do.

Can Your Employer Fire You for Filing Bankruptcy?

Federal law explicitly prohibits government employers from terminating or discriminating against an employee solely because they filed for bankruptcy. Private employers fall under a slightly different standard: they cannot discriminate based on a bankruptcy filing related to debt that was discharged. Note the following:

• Government employers cannot fire you, demote you, or reduce your pay because you filed for bankruptcy.
• Private employers cannot treat a discharged debt as grounds for adverse employment action.
• No employer can retaliate against you for exercising your legal right to seek debt relief.

This knowledge provides many people with peace of mind. In addition, a bankruptcy attorney can explain all of your options and advocate for you if needed.  

What Happens If You Have Wage Garnishment Under Chapter 13?

Under a Chapter 13 repayment plan, the court sometimes issues a wage deduction order, which directs your employer to withhold a portion of your paycheck and send it to the bankruptcy trustee. If your Chapter 13 plan includes a wage deduction order:

• Your employer’s payroll department will receive official notice from the court.
• The deduction is automatic and handled administratively.
• Your employer is legally prohibited from using this information against you.

Not every Chapter 13 case requires a wage deduction order. Your bankruptcy attorney can walk you through whether this applies to your specific situation.

Are There Any Jobs Where Bankruptcy Could Affect Your Employment?

For most people, the answer is no. However, a small number of jobs may involve additional considerations, such as:

• Security clearance positions: Financial instability can sometimes be flagged during clearance reviews, though bankruptcy alone does not automatically disqualify you.
• Financial industry roles: Certain licenses and positions regulated by FINRA or similar bodies may require disclosure of bankruptcy on applications.
• Law enforcement and government contracting: Background checks for some roles may include a review of public financial records.

If you work in one of these fields, it is worth discussing your situation with a bankruptcy attorney before filing.

What You Can Do If You Have Questions About Your Case

Filing for bankruptcy is a legal process, and you have rights throughout it. If you are worried about what your employer might find out, or what you are required to disclose, the best thing you can do is talk to someone who knows the law.

At Whitten & Whitten, we offer free phone consultations for anyone in Northwest Indiana who is considering or has recently filed for bankruptcy. Contact our team today to schedule a consultation.