Can I Be Fired for Declaring Bankruptcy?

Employers may not discriminate against employees who have filed for bankruptcy under Section 525 of the Bankruptcy Code. This applies to either private employers or governmental employers under different sub-sections of 525, but, in either case, employers cannot discharge, fire, or otherwise discriminate against employees who have filed for Chapter 7 or Chapter 13 bankruptcy. (This is, by the way, the same section of the Bankruptcy Code that forbids lenders from denying student loans to applicants on the basis that they have declared bankruptcy.)

Therefore, if your current employer discharges you because you have declared bankruptcy, that employer is in violation of Federal law. However, any action taken against filing employees must be demonstrably related to the bankruptcy. If this can be proven, an employee who was suffered workplace discrimination may have a private cause of action.

What is less cut-and-dry is the denial of employment by prospective employers. When applying for a new job, many potential employers these days request your authorization to pull and inspect your credit-report. This section of the Bankruptcy Code has been interpreted by courts to apply generally only to current employers and not prospective employers.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.