Many Americans who file for bankruptcy fear that they will be discriminated against by their employer. If you have been discriminated by your employer or prospective employer because you had filed for bankruptcy protection, consult with an experienced bankruptcy attorney. You can claim compensation from the employer. (See also Filing for Bankruptcy and Your Job).
Bankruptcy Code
Section 525 of the Federal Bankruptcy Code prohibits employers from discriminating against an employee or job applicant solely on the basis of bankruptcy filing. No employer—government or private—may fire you because you filed for bankruptcy, nor may an employer discriminate against you in other terms and conditions of employment, for example, by reducing your salary, demoting you, or taking away responsibilities, because of your bankruptcy. If there are other valid reasons for taking these actions, the fact that you filed for bankruptcy won’t protect you. In other words, an employer who wants to take negative action against you can do so provided there are other valid reasons to explain the action—such as tardiness, dishonesty, or incompetence. However, if you are fired shortly after your bankruptcy is brought to your employer’s attention, you might have a case against the employer for illegal discrimination because of your bankruptcy.
Employees
Federal, state, and local governmental units can’t legally discriminate against you because you filed for bankruptcy. Many government jobs require a security clearance. If you are a member of the armed forces or an employee of the CIA, FBI, another government agency, or a private company that contracts with the government, you may have a security clearance. Do you risk losing your security clearance if you file for bankruptcy? Probably not. In fact, the opposite may be true. A person with financial problems—particularly someone with a lot of debt—is at high risk for being blackmailed. By filing for bankruptcy and getting rid of the debts, you substantially lower that risk. Prohibitions against private discrimination aren’t nearly as broad as prohibitions against government discrimination. Private employers may not fire you or punish you because you filed for bankruptcy. Other forms of discrimination in the private sector, however, such as denying you rental housing, a surety bond, or withholding a college transcript, are legal.
Job Applicants
No federal, state, or local government agency may take your bankruptcy into consideration when deciding whether to hire you. There is no corresponding rule for private employers, however, and some people find that having a bankruptcy in their past comes back to haunt them, particularly when applying for jobs that require them to deal with money (bookkeeping, accounting, payroll, and so on). Many private employers conduct a credit check on job applicants as a matter of course and will find out about your bankruptcy from the credit report. While employers need your permission to run a credit check, employers can also refuse to hire you if you don’t consent.
Getting Legal Help
If you have been discriminated against by your employer or a prospective employer, you can sue the employer for discrimination. Consult with an experienced bankruptcy attorney to learn your options.
