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Will your employer find out about your bankruptcy?

Bankruptcy comes with a lot of questions, one of the most common of which is, will your employer find out? Generally speaking, the answer is no, but as with everything, exceptions do exist.

Though filing for bankruptcy results in the creation of a public record, your employer will likely not know about it unless he or she actively searches for the information. Save for in certain circumstances, he or she will not receive notice of your bankruptcy, either, meaning you can generally feel secure in your privacy. However, some situations may warrant your employer’s involvement, in which case your employer will receive an official notice. Upsolve explores those three situations in brief.

You want to stop a wage garnishment

If a creditor filed a lawsuit against you to collect the money you owe, and if you failed to respond to said lawsuit, the judge may have entered a default judgment against you. Once the court issues a judgment, the creditor can serve it to your company’s payroll department. The payroll department then has a legal obligation to withhold, or garnish, your wages from your paychecks before you even see the money.

Many people file for bankruptcy solely to stop wage garnishment, as bankruptcy places an “automatic stay,” or a halt, on certain legal proceedings such as garnishment. If you filed bankruptcy to prevent further garnishment of your wages, your payroll department must receive official notice from the courts that you opened a case before it can stop garnishing your wages.

The courts issue a payroll deduction order

If you filed for a Chapter 13 bankruptcy, which is essentially an extended repayment plan, the courts may decide that the safest way to fund the plan is to deduct the agreed upon monthly amount from your wages. As with a wage garnishment, the bankruptcy courts will need the cooperation of your company’s payroll department to follow through with the payroll deduction order.

You have to list your employer as a creditor

When you file for bankruptcy, you have to list all of your known creditors and swear, under oath, that the list is accurate to the best of your knowledge. That means if you owe your employer money, you have to include him or her on the list. Your employer will then receive notice of your case, as will the rest of your creditors.

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