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Can bankruptcy impact getting hired?

| Nov 18, 2020 | Bankruptcy |

Bankruptcy law in Illinois provides a legal way to get rid of certain debts, but many debtors have concerns about losing their jobs over it. In most cases, they will be able to keep their job, and bankruptcy could benefit them. While an employer may base hiring decisions for certain positions, on a bankruptcy filing, those instances are rare, and will be fairly unlikely in the years after this COVID-19 pandemic.

Anti-discrimination code

Consumers often see bankruptcy as a way out of debt that arose from circumstances beyond their control. However, some employers, landlords and lenders see bankruptcy as an indication of financial risk.

Bankruptcy has an anti-discrimination code under Section 525a to prevent government agencies from using bankruptcy as a basis for hiring, but it can be hard to prove. One section directly relates to private employers, but it removes the phrase about denying employment.

Job denials, firings and bankruptcy

Most courts have concluded that Congress didn’t intentionally leave out phrasing about job denial. Even if it had such phrasing, the employer could consider other factors when hiring, such as drug or alcohol use.

In some cases, the employer may require an employee to give the employer permission to access credit reports. Since bankruptcy stays on credit reports several years, the employer will most likely see it. While an employer needs permission to pull records, they have the right to refuse to hire someone who won’t sign the release form.

An employee cannot be fired if they have filed bankruptcy.  However, courts may conclude that an employer has a right to reduce hours, lower salaries or demote an employee because of it. In certain circumstances, the courts could look for patterns of discrimination to determine if it relates to bankruptcy.

Employers who find out that an employee filed bankruptcy sometimes take action against an employee. If an employee feels that their employer made a firing decision based on solely on bankruptcy, they may want to seek legal assistance.

With the massive layoffs, and closings of thousands of businesses during this pandemic, many people have no place else to turn but to file a Bankruptcy.  Bankruptcy is a LEGAL and legitimate way to discharge overwhelming and crushing debt and give people a fresh start.  It is hard to imagine that during this challenging time, that a bankruptcy filing will be held against a debtor.