Will Personal Bankruptcy Prevent Me From Working in the Insurance Industry?

If you’re planning to file for bankruptcy—or have a bankruptcy in your past—you may be concerned about any effect it may have on your insurance career. While insurance license regulations differ from state to state, many don’t specifically prohibit an applicant from going through the licensing procedures to get an insurance license. And license renewals are generally not a problem. However, be sure to check with your state insurance department for further clarification on this issue.

In this article we’ll discuss some frequent bankruptcy-related concerns and getting (and keeping) a job in the insurance business. Some common questions people have, relative to bankruptcy:

Will my company discover a Chapter 13 or Chapter 7 bankruptcy filing?

Can my employer fire me because of my bankruptcy?

Can an employer pass over a job applicant because of a bankruptcy?

There are many myths surrounding bankruptcy. First, it is an absolute falsehood that people filing for bankruptcy are automatically prevented from working in the insurance business. The fact is that certain companies do look at your credit history as part of the application process. As an example, a company may check to see if you have substantial debt which might lead you to make poor decisions at work or on behalf of a client.

A potential employer might also be looking to see how you handle your own finances. After all, the thinking goes that if you’re struggling with too much debt, you may just be tempted to steal from an employer or client. This is a reasonable assumption for an employer looking to decide between applicants. If you’re applying for a position in the insurance industry and there’s a record of bankruptcy, explaining the situation completely early on may be helpful to your prospects for that job.

No local, state or federal government agency can consider a bankruptcy filing when deciding to hire you. On the other hand, private employers—like insurance agencies—are not held back by this rule. Some potential insurance agents learn that a bankruptcy in their past may come back to bite them.

Many insurance carriers and agencies run credit checks on applicants. If so, the potential employer will learn about any bankruptcy from the credit report. Bankruptcy filings can certainly cause problems for those individuals applying for jobs that require the handling of money, such as accounting, payroll, bookkeeping, etc.

While an employer absolutely does need your permission to run a background or credit check, keep in mind that an employer can also decline to hire you if you say no. If you are asked to consent to a credit check, consider being forthright about the things an employer might find. Being upfront and honest might offset any negatives that may be lurking in a credit report.

Can you lose your existing job because of a bankruptcy?

Though an employer might find out about a bankruptcy, take comfort in the fact that in most instances a bankruptcy will not affect your current job.

An employer—private or government—can’t terminate you for a bankruptcy as a singular cause. Also, your employer can’t use bankruptcy as an excuse to alter the terms of your employment. As examples, your employer cannot do the following: reduce your salary, reduce your job responsibilities, or demote you.

But, if your employer does have additional good reasons for taking those actions, such as dishonesty, incompetence, or regularly being late for work, the fact that you have a bankruptcy won’t help your cause.

However, if you lose your job soon after your employer finds out about your bankruptcy—and no other legitimate reasons exist for your termination—you may just have a discrimination case.

The fact is, unless told, most employers rarely will find out about a bankruptcy filing. However, it does happen.

If your employer is already garnishing your wages and then you file for bankruptcy, the employer will learn about it. Your employer will be notified of the bankruptcy for the purposes of putting a stop on the garnishment.

Filing for Chapter 13 bankruptcy in some jurisdictions will likely mean your employer will find out about your bankruptcy. Because the judge may very well order your payments to be automatically deducted from your paycheck, your employer will be obligated to do their part.

Also, when you complete your bankruptcy paperwork, you’ll have to list all your debts. If you’re paying back your employer for whatever reason, you will have to include that, and your employer will be notified of the bankruptcy.

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