Will Bankruptcy Affect Your Job Search?


Declaring bankruptcy is a big deal for individuals. It usually occurs after several major challenges that can leave someone struggling to get back on their feet. Part of that struggle can often be finding a new source of employment. But will bankruptcy affect your job search or opportunities for future employment? We explore that question in today’s blog.

In general, bankruptcy shouldn’t have too big of an impact in your current employment. In fact, in most cases, your bankruptcy won’t have any effect on your current employment. No employer can fire you solely because you fired for bankruptcy. If you are fired shortly after your bankruptcy is brought to your employer’s attention, and no other justifications exist, you might have a case against the employer for illegal bankruptcy discrimination. In most cases, employers rarely find out about a Chapter 7 bankruptcy filing. Only if a creditor has sued you, obtained a judgment, and started garnishing your wages would your employer learn of the filing. In the case of Chapter 13 bankruptcy, your employer is likely to learn of your bankruptcy case through an income deduction order, where your employer will be pressed into service as a pseudo collection agency. Regardless of how your employer does or doesn’t find out about your situation, bankruptcy alone is not grounds for termination.

But for those looking for a job in a private industry, there are some things to take into account. When it comes to security clearance, if you are a member of the armed forces, an employee of the CIA, FBI, other government agency, or a private company that contracts with the government, chances are still that it’s unlikely you’ll lose security clearance. While there are many consequences to doing so, filing for bankruptcy clears your debts, which can actually work in your favor when it comes to getting security clearances. Less debt means less risk of being blackmailed, which usually works in your favor in these situations.

For those candidates simply wondering whether an employer will turn you away simply because you have declared bankruptcy, the answer is in most cases they should not. No federal, state, or local government agency can consider your financial difficulties when deciding whether to hire you. Private employers, however, aren’t constrained by similar rules, but unless your role requires you to deal with money, it is unlikely to be an issue they take into consideration.

Many private employers do conduct a credit check on job applicants and will find out about your bankruptcy from the credit report. If you know they may be concerned by your bankruptcy filing, it’s worth speaking candidly about what they will see. Being upfront and honest about your history is more likely to work in your favor than against. Employers understand that things happen, and if you are willing to learn from past mistakes, that is an employee that they want to work with in the future.

Work With All-Star Personnel Today

Are you looking for a new job? Do you need help with your job search? Contact the team of recruiters at All-Star Personnel today to get started on working with a top employment agency in middle Tennessee!

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