Employment
If you file bankruptcy, you have some limited protections from having your bankruptcy filing affect you in the future. Section 525 of the Bankruptcy Code lays out these protections. Unfortunately this statute it is very poorly drafted and difficult to decipher with strange references to things like “perishable agriculture” and “packers and stockyards”. The full text is below this article, but here are the highlights:
Public Employment
11 U.S.C. §525(a)”…a governmental unit may not….discriminate with respect to…a person that is or has been a debtor…”
Private Employment
11 U.S.C. §523(b)”No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor…”
There are exceptions to these employment discrimination rules which would apply to employment involving things like access to confidential information, security clearances, trade secrets, access to money, bank accounts, or private personal information.
Student Loans
The protection against discriminatory treatment in the context of obtaining a student loan or grant is much more clear. The US Department of Education or any other public entity cannot refuse to issue a student loan or grant solely because you have filed bankruptcy
Student Loans
11 U.S.C. §525(c): “…A governmental unit that operates a student grant or loan program… may not deny a student grant, loan, loan guarantee, or loan insurance to a person that is or has been a debtor…”
State Law Protections
States can provide for additional protections, which vary from state-to-state. In California we have Assembly Bill 22 which amended the California Civil Code to include protections arising from one’s credit report – which would include the credit reporting of someone’s bankruptcy filing.
Other Situations
Obviously life doesn’t just come down to employment and student loans. A bankruptcy is a permissible ground for discrimination when it comes to renting, car loans, mortgages, and really anything that is not covered by the three situations addresses in 11 U.S.C. §525.
How Strong are these Protection?
Unfortunately discriminatory treatment is extremely difficult to prevent, even when is prohibited by law – such as protections against discrimination on the basis of race, color, ethnicity, national origin, religion, disability, sexual orientation, gender expression or gender identity. Law professors love saying that you could be discriminated against because “your shirt was the wrong shade of cornflower blue”. The point is that people will often discriminate against others for a variety of reasons, but in order to get around this, they just won’t say the illegal part out loud.
11 U.S. Code § 525 – Protection against discriminatory treatment – Full Text
(a) Except as provided in the Perishable Agricultural Commodities Act, 1930, the Packers and Stockyards Act, 1921, and section 1 of the Act entitled “An Act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1944, and for other purposes,” approved July 12, 1943, 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.
(b) 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.(c) (1) A governmental unit that operates a student grant or loan program and a person engaged in a business that includes the making of loans guaranteed or insured under a student loan program may not deny a student grant, loan, loan guarantee, or loan insurance to a person that is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, or another person with whom the debtor or bankrupt has been associated, because the debtor or bankrupt 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 a case under this title or during the pendency of 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.
(2) In this section, “student loan program” means any program operated under title IV of the Higher Education Act of 1965 or a similar program operated under State or local law.
