Worried About What The Boss Will Say If You File For Bankruptcy? Your Fears Are Probably Unfounded

Will your boss find out that you filed for bankruptcy? While this question can concern a lot of people who are facing serious financial problems, most people don't need to be as stressed as they are over the idea. This is why.

Your boss may not even find out.

It used to be the norm for bankruptcy filings to be printed in the local newspaper in order to notify your creditors—but the large number of bankruptcy filings that have happened in recent decades have made that impractical and most courts have abandoned the practice. Some jurisdictions have a legal newspaper that still publishes all the legal filings—but those are publications that have to be purposefully sought out and exist mostly so that potential creditors can look for debtors. Unless your boss has a penchant for reading the local legal filings, he or she isn't likely to see the notice.

Your boss will only be notified directly if it is absolutely necessary.

There are some situations where the court will contact an employer about your bankruptcy in order to clarify information or obtain necessary evidence for your case. Consider the following situations:

  • You failed to provide enough documentation about your wages, tips, bonuses, stock options, or other payments.
  • The documentation you did provide wasn't current enough.
  • You're alleging an extreme reduction in income, without a change in jobs. For example, if you routinely worked overtime and you are now alleging that there's simply no overtime available, the trustee may want to document that since the loss of income affects your ability to repay your debts.

There are also some situations where the bankruptcy trustee will notify your employer as a matter of necessity. For example, filing bankruptcy halts most wage garnishments. If your wages are currently being garnished by a creditor, the bankruptcy trustee will notify your employer that you're now entitled to relief while the bankruptcy is pending. 

Another common situation where an employer will be notified of a bankruptcy is when debtors file Chapter 13, which allows you to repay all or most of your debts through a payment plan that takes 3-5 years to complete. In many cases, the trustee will order the payments to be made through payroll deductions. That saves the court time and ensures that you'll stay on track.

Your boss may not even be surprised.

Bankruptcy used to be seen as a very socially embarrassing situation—but downturns in the economy over the last few decades have forced so many people into bankruptcy that it simply isn't considered a personal failing anymore. In addition, most people are aware that the majority of bankruptcies result from things that are outside of the debtor's control—like losing a job when a company changes hands, going through a difficult divorce, or having a family member suffer a severe illness or injury.

In addition, it may surprise you to learn that around 9% of people who make $60,000 or more end up filing bankruptcy and 57% of people who file are college graduates. Some of the highest-paid professions are also those at the highest risk of bankruptcy—like doctors, athletes, insurance brokers, public accountants, and even financial advisors. It's very unlikely that your boss hasn't had employees suffer through hard times before. For that matter, your boss may have also been in your situation at one time.

Your boss may also see your bankruptcy as a positive thing.

Your boss probably hasn't been oblivious to your financial problems, especially if creditors have tried to hound you at work. Your boss may also be aware that your financial stress is distracting you. Filing for bankruptcy can stop interruptions at your office that are taking you away from work. It can also relieve some of the pressure on you, which is bound to make you more focused and productive as an employee.

In addition, your employer may feel more secure knowing that you are accepting responsibility for your financial situation and resolving your debts. It could also make your employer more comfortable letting you handle business assets if he or she knows that your financial crisis isn't likely to drive you to something extreme, like fraud or theft.

For more information or to discuss your situation, talk to a bankruptcy attorney in your area today, such as those at Demers Gagnier Inc..