Can my employer fire me because of my bankruptcy?

The United States Bankruptcy Code makes it illegal for your employer to fire you because you have filed for bankruptcy. As an employee, the Bankruptcy Code protects you from discrimination if: you are, or have gone through a bankruptcy proceeding; if you are insolvent – either before filing for bankruptcy or while the petition was pending; or if you have not paid a dischargeable debt. Both government employees and private sector employees are protected from bankruptcy employment discrimination, but the scope of protection differs for each.

Current Employee vs. Prospective Employee Discrimination

The Bankruptcy Code explicitly states that governmental employers can not discriminate against current employees, nor may they discriminate when hiring new employees. However, although private sector employers can not discriminate against current employees, the Bankruptcy Code remains indifferent when it comes to private sector employers hiring prospective employees. Courts have interpreted this indifference to mean that private sector employers are not prohibited from discriminating on the basis of bankruptcy status when hiring, however, they are prohibited from discriminating against current employees. This means that while you are employed, no employer may fire you or discriminate against you otherwise because you have filed bankruptcy. Such discrimination against an employee might include being treated unequally, demoted, or refused a promotion.

The definition for “employed” itself has actually been a subject of controversy in some cases. In one case, a district court held that a private sector employee was effectively hired when he went through the hiring process, signed a W-4 and an I-9, filled out an employee uniform order form, and signed other employee agreements, such as the employee handbook. Therefore, the court ruled, when the employer said that they were declining to hire him on the basis of his filing for bankruptcy, the employer was actually discriminating against a current employee, and not a prospective one.

Filing a Discrimination Lawsuit

If you have been fired or otherwise discriminated against by your employer, you may file a discrimination lawsuit against them in federal court. However, proving a discrimination case is tough. Most employment is at-will employment, meaning that your employer can fire you at any time, for any reason, except for a protected reason. Discrimination because of bankruptcy falls into this protection, however, you must show that there were no other reasons your employer might have fired you. This could include poor job performance, or excessive tardiness. If the employer is able to prove even the smallest non-bankruptcy related reason for firing you, your claim could be defeated. Further, employers are not prohibited from firing you for having bad credit. However, if your employer fires you after you file for bankruptcy for having bad credit, you at least have some measure of protection from the Bankruptcy code, but only if you can prove the termination was really based on the bankruptcy.

Getting Legal Help

If you believe that you have recently been discriminated against at work because of your bankruptcy status, you should contact a bankruptcy lawyer to discuss your claim. Bankruptcy discrimnation claims can quickly become complex, and it is wise to have an experienced bankruptcy attorney by your side throughout negotiations and litigation.