What Happens If You Get a Job During a Bankruptcy?

Protections

The U.S. Bankruptcy Code protects people who have filed against bankruptcy from employer discrimination. This will be an aid to you as you seek employment after you have filed for a bankruptcy. However, this does not mean that a potential employer won't discover your bankruptcy. The code protects you against discrimination. It does not keep your name from the public record. If you suspect you've been discriminated against because of a bankruptcy, you will have to prove it.

To qualify for a Chapter 7 bankruptcy, you must pass a means test if your current income is greater than the state median income. If you are not working, it will be no problem to pass this test. However, if you find work during a bankruptcy, your new income will have to be compared against the state median income. If you cannot pass the means test, then your bankruptcy will generally be converted to another type of bankruptcy, but it can also be dismissed.

If you fail to pass the Chapter 7 means test, it is likely that your petition will be converted to a Chapter 13 bankruptcy. The U.S. Courts actually call a Chapter 13 bankruptcy "a wager earner's plan." If you have a regular income and want to pay off your debts, this type of bankruptcy allows you to work with your creditors to develop a repayment plan while offering you protection from collections and foreclosure. Some of your assets will be liquidated, and some of your debt may be forgiven in order to develop a play that allows you to pay off debt in three to five years.

In most cases, your employer won't find out about your bankruptcy from the bankruptcy court. However, if the bankruptcy trustee needs work information that you won't or can't provide, he may contact your employer. Also, following a Chapter 13 bankruptcy, part of your repayment plan may be to have a portion of your wages garnished to pay off debts. In this case, the employer will need to be notified to make the payroll adjustments.