Can I Lose my Job for Filing Bankruptcy?

It is prohibited by the Bankruptcy Code for an employer to fire you solely because you filed for bankruptcy.

Section 525(a) of the bankruptcy code states that a governmental unit may not

"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."

Similarly, Section 525(b) prohibits private employers from terminating the employment or discriminating with respect to employment of a person who is or has been a debtor under all the same circumstances quoted above.

It is important to note, though, that the same standards may not apply to hiring discrimination. Recently, the Third Circuit Court of Appeals held in Rea v. Federated Investors that the omission of the words "deny employment to" in subsection (b) meant that private employers could discriminate against a potential employee because that person had filed for bankruptcy. The Court decided that the inclusion of the words "deny employment to" in subsection (a) was a significant difference in the obligations of governmental employers and private employers.

Special thanks to the Lawffice Space Blog for bringing this recent case to our attention.