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When your employer finds out about your bankruptcy

Many people who file for bankruptcy are stressed over the potential impact it may have on their job.

Relax.

No employer- government or private- may legally fire you, demote you, reduce your salary, and so forth just because you filed for bankruptcy. That doesn't mean, however, that they cant fire you for other valid reasons while you're going through bankruptcy.

An employer will often never even know that you filed for Chapter 7 bankruptcy. The only time they might uncover this knowledge is if a creditor has sued you prior to you filing and has obtained a judgment to garnish your wages. When you file for Chapter 7 bankruptcy, your employer will be notified to discontinue the wage garnishment. Regardless, it can't be used against you.

If you have a regular job and file for Chapter 13 bankruptcy, the court may order bankruptcy payments to be automatically deducted from your paycheck, therefore your employer will know.

In the hiring process, no government agency may take your bankruptcy into account when mulling over a decision to hire you. However, there is no law prohibiting a private employer from doing so. Many private employers conduct credit checks on job applicants, but need your permission. You can refuse, but your refusal may wind up costing you the job. It's best to be open about your bankruptcy in this situation. Employers looking for bookkeepers, accountants, or payroll personnel might not look favorably on a bankruptcy in your credit file.

Generally speaking, employers aren't too concerned about your financial history. They just care that you can do your job.

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