Employment Termination Based on Debtor Status

The law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case or has not paid a debt that was discharged in the case.

The law prohibits the following forms of governmental discrimination: terminating an employee; discriminating with respect to hiring or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely upon the bankruptcy filing.

An employer can't discriminate against an employee because a credit background check revealed that the employee sought protection under the Bankruptcy Act. What this means is that an employer can't deny employment or a job promotion or a reassignment solely because of bankruptcy or the bad debts one had before claiming bankruptcy.

If an employee has been fired without a good reason or in violation of federal or state law, it may be a wrongful discharge and the employee can challenge the firing. The laws regulating firings vary from state to state. If the employee succeeds, employers can be made to pay back wages, fines, and possibly punitive damages or the employee could be returned to his or her job.

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