Can I lose my job if I file for bankruptcy?

10 Aug Can I lose my job if I file for bankruptcy?

Clients often worry that their boss might fire them if they file a bankruptcy case.  But the Bankruptcy Code explicitly prohibits any employer from discriminating against a person in their employment because of their having filed for bankruptcy relief.  Section 525 of the Bankruptcy Code is written in two parts.  The first part explains that governmental units can’t discriminate against a person even in hiring decisions.  It also provides that a person can’t be denied a license, like a broker’s license, or a driver’s license because the debtor obtained a discharge of a debt.

The second part of the statute seems to have equally strong protections against acts by private employers. However, most courts have held that a private employer may discriminate in new hiring decisions because a person filed a bankruptcy case.  A private employer may not discriminate against an existing employee merely because he or she filed a bankruptcy case.

This intersection between bankruptcy law and employment law is not all that well known.  So if you face an employment problem owing to your bankruptcy, make sure that your employment lawyer and your bankruptcy lawyer talk to each other when they are advising you.

Lakelaw represents people in Illinois and Wisconsin even in the most difficult bankruptcy cases.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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