The Short Answer
Federal law protects you from being fired because you filed bankruptcy. Under 11 U.S.C. § 525, neither government employers nor private employers can terminate or discriminate against you solely because you are or have been a bankruptcy debtor. In most cases, your employer won't even know you filed unless you tell them. That said, the law offers less protection at the hiring stage — particularly with private employers in finance-related industries who run credit checks on job applicants.
The short answer is, no. Federal law prohibits an employer to discriminate against you for declaring bankruptcy. According to 11 U.S.C § 525 (a) and (b), no governmental unit or private employer may “…terminate the employment of, or discriminate with the respect of employment someone who is or has been a debtor under this title…” In other words, you can’t be fired from your job simply because you have filed for bankruptcy.
In most cases, your employer will never even know that you filed for Chapter 7 bankruptcy or Chapter 13 bankruptcy unless you tell them. Also, as you know, bankruptcy has nothing to do with how well you can perform your job duties. Once you are hired, they must have a different, legitimate reason to let you go (such as being late, not showing up at all, or not correctly performing your job duties).
Although the law states that employers cannot use your credit against you; simply put, they sometimes do. You may not be able to be fired from a job because you filed bankruptcy, but it could possibly prevent you from being hired for a job (or in some cases a promotion). Normally, this only applies to your employment with private companies handling money like banks and other financial institutions. Federal, state, and government agencies cannot refuse employment due to bankruptcy.
Many companies have begun completing background checks, which include checking someone’s credit score. As unfortunate as it is, potential employers may use this to gauge your responsibility. Do you pay your bills on time? Are you overextended? Someone with a high debt to income ratio could potentially be looked at as someone who might be more likely to steal from a company. Is this fair? No, not necessarily but it is more common than you think. Many states are in the process of trying to ban credit checks used to determine employment, in an effort to protect citizens’ civil rights.
Key Takeaways
- Federal law (11 U.S.C. § 525) explicitly prohibits any employer — government or private — from firing you simply because you filed for bankruptcy.
- Your employer is unlikely to find out you filed Chapter 7 or Chapter 13 bankruptcy unless you voluntarily disclose it.
- Government and public employers cannot refuse to hire you based on a bankruptcy filing — that protection applies at the application stage as well.
- Private employers, especially those in financial industries like banks, may use a credit check as part of hiring and could factor in your financial history even though the law discourages it.
- A bankruptcy filing can sometimes affect a promotion or new job offer at private companies that handle money, even if firing you over it is illegal.
- Many states are moving to restrict employment credit checks, but North Carolina has not yet passed a blanket ban — so knowing your rights matters.
Attorney Insight
The fear I hear constantly in my office is, "If I file, will I lose my job?" — and the answer is no, the law is clear on that. What people don't anticipate is the hiring side of the equation. I've had clients in Charlotte and Greensboro pass up bankruptcy relief because they were job-hunting at a bank or financial firm and worried about a credit check. That's a real and legitimate concern for a narrow set of industries, but for the vast majority of employers and job types, a bankruptcy filing simply doesn't come up. Don't let a fear that applies to maybe 5% of job situations stop you from dealing with debt that's affecting 100% of your life.
