How will filing for bankruptcy affect my job, and does my employer
get notified if I file? Also, will I lose the little I have saved
in my retirement program?
-- Anxious Angelina
An employer, or prospective employer, has to
have your written consent to get a copy of your credit report. Not
all states allow employers to obtain a credit report for employees
or prospective employees. But you may have provided your current
employer with that consent as part of your job application.
Bankruptcy Act has this to say about private employers discriminating on the
basis of learning about an employee's bankruptcy:
No private employer may terminate the employment of, or discriminate with respect
to employment against, an individual who is or has been a debtor under this title,
a debtor or bankrupt under the Bankruptcy Act, or an individual associated with
such debtor or bankrupt, solely because such debtor or bankrupt --
or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy
(2) has been insolvent before the commencement of a case under this title
or during the case but before the grant or denial of a discharge; or
not paid a debt that is dischargeable in a case under this title or that was discharged
under the Bankruptcy Act.
The Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005, or BAPA, has expanded the definition in regard to which
retirement savings are protected. Under the old rules, only ERISA-qualified
plans were protected, which meant virtually all 401(k) plans and
pension plans. The new law generally includes IRAs up to $1 million
as protected assets.
The U.S. Supreme Court also ruled recently that IRAs
are exempt from becoming part of the bankruptcy estate used to pay
creditors, at least prior to age 59 ½, when distributions
are no longer subject to the 10-percent early-withdrawal penalty
tax. The recent changes to the law and the Supreme Court ruling
are complex, so you'll want to confirm with your bankruptcy attorney
that your retirement accounts are protected.
Most of the provisions of
BAPA become effective in October. There's going to be a big rush to file for bankruptcy
before that date. If you're seriously considering filing for bankruptcy, you should
talk to an attorney now.