Protect Your Job when Filing for Bankruptcy

United States federal law seems clear. The bankruptcy code states that government and private employers cannot terminate the employment of someone based solely on the fact that they've filed for bankruptcy. In practice, however, proving discrimination on this basis can be incredibly difficult. To protect your job while filing for bankruptcy, you generally want to avoid disclosing that fact to your employer. If you believe you were fired because you filed for bankruptcy, speak to an experienced employment attorney as soon as possible so you can assess your options.

Steps

Avoiding Disclosure

1. Don't tell your boss you're filing for bankruptcy. Particularly if you're filing for Chapter 7 bankruptcy, there's little to no chance your employer will even find out that you're filing for bankruptcy – unless you tell them.
   • This means that if you have to take any time off from work to handle your bankruptcy, for example to meet with your attorney or attend a hearing, you'll have to come up with some other reason to excuse your absence.
   • You don't have to lie, but you can be vague. If pressed for details, you can simply state that it's personal, not work-related, and that you'd rather not go into it.
   • If your boss insists on a specific reason, you'll have to decide what to do. Use your best judgement to determine whether disclosing your bankruptcy to your boss is the right thing for you to do.
2. Watch who you tell at work. You may feel close to some of your coworkers, and it's natural to want to talk to them about important things that are going on in your life. However, proceed with caution when it comes to your bankruptcy if you're concerned they might tell higher-ups about it.
   • It can be difficult to avoid talking about your bankruptcy, particularly if you have close friends at work who you normally spend time with outside the workplace.
   • Keep in mind that if your boss is to know, it's better to hear about it from you than from someone else, because that way you can control the information your boss receives.
   • If someone else talks about it, on the other hand, they may make it sound like a bigger deal than it is.
3. Talk to your attorney from home. The workplace isn't the best place to have a phone conversation with your attorney anyway, because of the risk that others could overhear. This is particularly true if you're trying to keep your bankruptcy secret from your employer.
   • Overhearing half a conversation is a recipe for disaster if the person who happens to overhear is also someone who loves to gossip.
   • Waiting until after work to talk to your attorney also enables you to have undivided attention on the conversation, which can be crucial to understanding your bankruptcy case.
   • Another option if you need to reach your attorney during the workday is to send an email. Make sure you use a private email account on your own device, though, not a work computer or a work email that might be monitored.
4. Know when to give your employer advance notice. If you're filing for Chapter 13 bankruptcy, there's a good chance your employer is going to find out about your case eventually. If payments on your reorganization plan are taken out of your check, your employer will get a notice to adjust the payroll.
   • In that situation, it's generally better for you to tell your employer first, so they hear it from you rather than from the court.
   • Getting an unexpected notice can serve as an invitation for your employer to think the worst, especially if your employer gets the impression that you haven't mentioned it out of fear or shame.
   • Not all districts require these orders, however. Find out if one will be entered in your case before you talk to your employer about it.

Suing for Wrongful Termination

1. Keep detailed records of your job performance. If you suspect your employer might fire you because you've filed for bankruptcy, you have an uphill battle – particularly if at-will employment laws apply to your position.
   • Start saving copies of any performance reviews or positive comments you get, including emails or notes from supervisors or managers.
   • You also might keep a log and make entries each day to record positive experiences or statements from supervisors or coworkers.
   • Essentially, what you're doing is creating a record that will demonstrate that your employer had no reason to fire you except the fact that you filed for bankruptcy.
   • Protection from discrimination extends to other actions by your employer as well, even if those actions fall short of termination. For example, if you were due a raise or were in line for a promotion, your employer can't deny those just because you filed for bankruptcy.
   • There is an exception to this if you happen to work in the financial industry. Banks, investment firms, or other financial institutions can take your bankruptcy into account when considering you for a raise or a promotion.
2. Talk to trusted former coworkers. If your employer does fire you, talking about it with coworkers can confirm your suspicions that your termination was bankruptcy-related. In the event you decide to sue your employer, a few witnesses can strengthen your case.
   • To go along with your strong performance record, you're going to need some indication that your employer terminated you because you filed for bankruptcy. This isn't typically something that your boss is going to say to your face.
   • However, comments may have been made to someone else, or a coworker may have seen emails or other correspondence that discussed the issue.
   • Take care not to rely on mere rumor. Try to get directly to the source – the person to whom the statements were made, rather than someone who heard about it from someone else.
   • Take detailed notes of coworker statements that you think might be helpful in a lawsuit, and ask if they would be willing to testify on your behalf. If they are, take down their name and phone number for future reference.
3. Consult an experienced attorney. Wrongful termination lawsuits are extremely complex and difficult to prove. Find an experienced employment law attorney and lay out your case for them so you can decide if you want to sue.
   • Not only will you be filing your case in federal court (which has complex rules that can be difficult for a layperson to understand or intuit), but proving bankruptcy discrimination is incredibly difficult.
   • An experienced employment attorney will understand the types of proof you need and where you can possibly get them.
   • If your bankruptcy case is still pending and you've already hired a bankruptcy attorney, ask them for a recommendation.
   • Your wrongful termination case may intersect with your bankruptcy case, so it will be helpful if you have two attorneys who know and respect each other.
   • Employment law attorneys typically offer a free initial consultation, so it shouldn't cost you anything to at least talk to someone. Given your current financial situation, they should be willing to work with you on fees and may take your case on contingency.
4. Notify the bankruptcy court. Particularly if your bankruptcy is still pending, you must notify the bankruptcy court if you intend to sue your former employer for wrongful termination. Any recovery you get typically will be factored into your assets for the purposes of your bankruptcy.
   • If you fail to notify the court of your claim – even if it's only at this stage a potential claim – against your employer, you run the risk that your bankruptcy case could be dismissed.
   • This rule applies even if you haven't technically decided whether you're going to file suit or not, so it needs to be taken care of as quickly as possible.
   • Talk to your bankruptcy attorney (if you've hired one) about your plans to sue your former employer for wrongful termination, and see what they say. They should be able to take care of this obligation for you.
5. File your complaint. If you've decided to file suit, your attorney will work with you to draft a complaint suing your employer for wrongful termination. Since your case is based in federal law, it must be filed in the federal district court with jurisdiction over your employer.
   • Your complaint will identify you and your former employer, and set forth factual allegations that, if proven, would constitute discrimination against you on the basis of the fact that you filed for bankruptcy, in violation of federal law.
   • Your attorney will work with you to decide the damages for which you should ask the court.
   • When your lawsuit is filed, you'll be responsible for paying a $400 filing fee. Your attorney may pay this and add it to your bill, or help you apply to have the fee waived.
   • Once you've filed your lawsuit, you must have it served on your former employer. This typically means you'll have a U.S. marshal hand-deliver the complaint to your former employer (or their attorney or representative).
   • After service, your employer has a brief period of time to respond. Expect them to deny your allegations and potentially file a motion to dismiss.
6. Participate in discovery. After the pleadings have all been filed and you've overcome any motion to dismiss filed by your former employer, the discovery process will begin. Through this process, you and your employer will exchange documents and information relevant to your case.
   • One method of discovery which may be particularly helpful in proving your former employer's motivations in terminating you is requests for production.
   • You can ask for copies of your former employer's communications regarding your termination, your personnel file, and any other related policy documents.
   • Your attorney also will likely want to depose the person or people responsible for your termination. A deposition is a live interview under oath that is recorded by a court reporter, who produces a written transcript.
   • Your former employer's attorney likely will want to depose you as well. Your attorney will help prepare you for your deposition.
7. Attempt mediation. Many federal courts require litigants to attempt mediation before they can proceed to trial. Even if it isn't required in your case, mediation may enable a quicker and simpler resolution to your claim.
   • In mediation, a neutral third party facilitates negotiations between you and your former employer that hopefully lead to a mutually agreeable settlement.
   • The outcome of mediation is completely voluntary. That is, no agreement is forced on you. If you and your former employer cannot come to agreement, no agreement will be made and your case will proceed to trial.
   • On the other hand, if you and your former employer are able to reach a mutually agreeable resolution, the terms will be set forth in a written agreement.
   • Once you both sign the written settlement agreement, its terms will be legally binding on both parties. Make sure you read it carefully and understand everything in it before you sign.

Searching for New Employment

1. Understand how the law protects you. Federal law prohibits government employers from discriminating against applicants because they filed for bankruptcy. However, this law doesn't apply to private employers.
   • If you're working for the government, filing for bankruptcy can even work in your favor – particularly if you're applying for a job that requires you to get a security clearance.
   • People with high debt are viewed as a security risk because they are susceptible to bribery. Since you've filed for bankruptcy, you don't have that issue.
   • When working in the private sector, however, it's important to remember that you don't have this protection.
   • For this reason, you should tread lightly when it comes to bankruptcy, and only mention it if for some reason the employer would find out from a third party.
2. Find out if the employer runs credit checks on applicants. Typically a potential employer isn't going to know that you filed for bankruptcy – particularly if you filed Chapter 7 and your case is closed – unless they run a credit check.
   • For some jobs, your financial background is only tangentially related (at best) to the job you'll be performing. For these, if the employer is running a credit check, you may be better off looking elsewhere.
   • For example, if you're applying to be a cashier at a grocery store, there's really no reason they should insist on doing a credit check before they hire you. You might be better off applying at another store rather than having to deal with it.
   • Some jobs – such as many in the financial sector – are going to be difficult for you to get, if not completely closed off.
   • This is because when you're charged with handling other people's money, the fact that you've filed for bankruptcy is seen as a sign that you don't know how to be financially responsible.
3. Be up front about your bankruptcy. If the employer is going to run a credit check, it's best to tell them about your bankruptcy before they find out about it themselves. This gives you the opportunity to put a positive spin on the choice you made.
   • The best time to tell the interviewer typically is not when they ask you to sign the form authorizing a credit check, but that may be the most opportune time.
   • Ideally, you want to bring it up at the first possible opportunity during your interview, to show that you're not ashamed of it and not shying away from it.
   • For example, if the interviewer asks you to describe a situation in which you overcame a challenge, you could mention your bankruptcy. Focus on the present and future, and talk about how you're grateful for the second chance and you're learning to be more responsible with your money.
4. Provide positive references. Particularly in some jobs, such as those in which you're handling money or managing money for others, having a bankruptcy can be a serious black mark on your record. Counteract that negative influence with strong personal references that can speak to your responsibility and strengths as an employee.
   • You want people who can speak to your work ethic and sense of responsibility in the workplace, but you also want people who can testify to your strength of character.
   • Ideally, list people as references who are aware of your bankruptcy. They may be able to use it to describe how you are proactive in addressing and solving issues before they become more serious problems.

References

See also

• Help an Unemployed Person
• Live With an Unemployable Person
• Be Dignified in Job Loss
• Take Care of a Jobless Person
• Survive the Jobless Phase
• Retain Your Job in Crisis
• Rejoice at Being Sacked
• Recover From Unemployment
• Take Action to Reduce Unemployment
• Make Money in a Difficult Job Market

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