Consumer Law

Can Filing For Bankruptcy Make You Lose Your Job?

By M. Stan Herring

The BKBlog has posted an article that discusses whether or not filing for bankruptcy is grounds for your employer to fire you. The Bankruptcy Code calls termination for this reason a type of "employee discrimination" based on a bankruptcy filing if:

You are, or have gone through a bankruptcy proceeding You are insolvent either before filing a bankruptcy or while your petition is pending; You have not paid a dischargeable debt

The Code goes on to say that

a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

Private employers are also covered:

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?

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(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
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

The Bankruptcy Code also protects job applicants from discrimination by prohibiting denial of employment or termination of employment because of a bankruptcy filing. However, employers don't have to explain why they don't hire you. Certainly most of them wouldn't want to tell you it was because of credit issues on your part.

We don't cover bankruptcy, but if you have questions or further concerns feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on May 06, 2010 (boomark / email).