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Bankruptcy and Job Hunting: What to Know Before Applying

by Luke Homen

Depending on the type of employer, the fact you went bankrupt in the past could be why you may be rejected for a job, so prepare before applying. Given your situation, your past financial difficulties may or may not be relevant to a future position, but logic and sense are two things you can’t depend on when hiring decisions are made. Convenient Bankruptcy helps clients through the bankruptcy process, and we’ll discuss how that may affect future job searches.

If you’re facing financial hardship, the Tulsa bankruptcy Convenient Bankruptcy law firm will help you explore your options and help you decide if bankruptcy protection is the right choice for you. Bankruptcy attorney Luke Homen helps clients and their families resolve their financial challenges to achieve financial freedom, which you can see in their client reviews. Call us at 405-296-0059, and a Tulsa bankruptcy lawyer will contact you.

Federal Law: Different Employers, Wording and Protections

Federal bankruptcy law covers how taking advantage of bankruptcy may or may not be held against you if you apply for a job. Section 525 of the Bankruptcy Code covers employment discrimination in two subsections. One covers employment by a government agency, and the other involves private employers. They state in part:

“(a)…a governmental unit may not…deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act…has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt-

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;

(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or

(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.”

Subsection (a) has more specific language. A government agency “may not…deny employment to” someone who filed for bankruptcy. Subsection (b) states private employers can’t terminate someone’s job due to their filing, but there’s no explicit language against denying employment due to such a filing like subsection (a). In the past, courts have interpreted this difference as barring government agencies from not hiring job applicants due to bankruptcy but allowing it for private sector employers.

Why Would an Employer Care?

Unless there’s an extraordinary circumstance, how someone handles their finances shouldn’t be an issue in finding the right job candidate any more than their love life, food preferences, or how often they call their Mom. However, employers have a lot of discretion in who they hire and why.

Depending on the opening and the potential employer, they may do an in-depth background check. This can include criminal convictions, lawsuits you filed, those filed against you, and bankruptcy filings. They may also look into your credit score and if you’ve had problems paying your bills. An employer may see someone who’s been bankrupt and not paying their financial obligations as irresponsible and who doesn’t live up to their responsibilities.

Ideally, a potential employer should warn you of such a background search, tell you what it found, and allow you to tell your side of the story. Honesty is the best policy when seeking a job, even if something in your work or personal history is less than stellar. That’s because if you lie about something, you get the job, and your employer discovers the lie, there’s a very good chance you’ll be fired.

Be “positively” honest about what happened. Be honest, but discuss it in a way that makes the situation as normal and relatable as possible. Discuss how you handled it as best as you could. Perhaps your medical bills weren’t paid because of a dispute with your health insurer. You were unexpectedly laid off, and your income sharply dropped. 

Don’t assume the worst. The person making the hiring decision may have faced a similar situation. They may not care about this issue, but they’re going through the motions because it’s corporate policy that hiring managers must ask about these issues. No matter the situation, do what you can and hope for the best.

Bankruptcy Should Enable You to Start Your Life Over

A prior bankruptcy filing could be a problem if you apply for a non-government job. Be prepared to discuss it if it comes up during the application process.

If you have difficulty paying your debts and obligations, bankruptcy might be an option. Time talking to a Convenient Bankruptcy lawyer will be well spent because you may learn of an effective way to get out of your situation. Schedule a consultation with a Convenient Bankruptcy attorney by calling us at 405-296-0059 or contacting us online to set up a time to talk. You’ll be glad you did.

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