Does My Employer Have to Know If I File Bankruptcy?

Posted by Wesley Scott on November 4, 2014 at 2:47 PM
Wesley Scott

does_my_employer_know_about_bankruptcyOne of the most common fears when someone considers filing bankruptcy is that everyone will know about it. In reality, very few people other than your creditors or those you tell personally will ever know that you filed a bankruptcy case. Though bankruptcy filings are a matter of public record, it is not as easy to locate these records as it is to find other matters of public record, such as arrests, driving violations or real estate purchases. 

The answer isn’t as simple for your employer’s awareness of your filing, because it varies from case to case. So let’s take a closer look.

Does My Employer Know About Bankruptcy Filings?


One common concern debtors have is whether or not their employer will know about the bankruptcy filing. In most cases, an employer will not know that an employee has filed bankruptcy unless there is a reason for the employer to be notified.

There are some cases in which your employer will be notified of your bankruptcy filing. Here are a few:

Garnishments or Levies – If your paycheck is being garnished or levied by a creditor for a debt that you owe, your employer’s payroll department will require notice of your bankruptcy filing so that it can stop deducting the garnishment or levy from your payroll. In this case, the court asks you to provide the name and contact information for the person in your payroll department who should receive notice of the bankruptcy. The reason we forward the Notice of Bankruptcy to your payroll department rather than waiting for the creditor to stop the garnishment or levy is because many creditors will not act as quickly to stop a garnishment as they do to request a garnishment. Notifying your payroll department ensures your payroll deductions stop instantly. Other than the people in the payroll department, no one else in the company needs to know about your bankruptcy filing.

Chapter 13 Bankruptcy Plan – In a small percentage of cases when you file a Chapter 13 case, your monthly trustee payments are deducted from your payroll. So in those cases, your payroll department will know about your bankruptcy filing in order to deduct your monthly payment and forward it to the Chapter 13 Trustee. Like with a garnishment, the only people at your place of employment that should know about your bankruptcy filing are those in your payroll department.

Credit Reports – Filing bankruptcy cannot be used as a reason to terminate your job. However, some employers may request access to your credit report as part of your job application; this most commonly happens when you role involves money management. While you are not obligated to do this, your potential employer is also not obligated to, and likely won’t, consider you as a candidate. All-in-all, very few employers require an employee to disclose this information and the Bankruptcy Code prohibits private employers, and almost all government employers from discriminating in hiring and firing employees based on the employee’s bankruptcy history.

 

Many debtors feel alone when they are facing bankruptcy; however, you would probably be surprised at how many people around you have been in your shoes at one point in their lives. Like you, they keep this information private, and no one finds out.

Bankruptcy is intended for people who are suffering and need an affordable solution to their debt problems. It provides them a fresh start to begin to rebuild their lives and their finances. The Supreme Court explained it well in the case of Local Loan Co. v. Hunt when it said bankruptcy “gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

 

If you are ready to begin a life without overwhelming debt, request a free bankruptcy consultation to discuss your bankruptcy options. We are more than happy to go over all of your options and answer any questions you may have.

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Topics: Bankruptcy

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