July 23, 2019

Bankruptcy and Employment: Can I Lose my Job for Filing Bankruptcy?

When you cannot service your debts it is time for a bankruptcy counseling sessionIn advising people regarding financial difficulties, I am often asked about bankruptcy and the effect that it has on employment, licensing and the like. In other words, a client will ask if bankruptcy will hurt his or her ability to get a job or will his or her employer fire them because I filed bankruptcy?  As to licensing, a contractor may ask about the ability to obtain a contractor’s license after filing bankruptcy.

The Bankruptcy Code’s Anti-discrimination Provision

The concept behind bankruptcy is to given the honest and needy debtor the chance to get a fresh financial start. This concept would be meaningless if employers and governmental licensing boards are able to discriminate against individuals who have filed bankruptcy seeking a fresh start.

Thus, the Bankruptcy Code provides an anti-discrimination provision.  11 U.S.C. Sec. 525 prohibits discrimination against individuals who have filed bankruptcy.  This provision applies to private employers who may not discriminate with respect to employment against who has been a debtor in a bankruptcy case.  It applies to governmental entities who may not deny licenses, permits, franchises or charters to an individual who has been a debtor in a bankruptcy case.  Also, governmental units cannot discriminate in employment against an individual who has been a debtor in a bankruptcy case.

Bankruptcy for people in all walks of life

As a practical matter, I have represented numbers of people who have ranged from bank vice presidents, attorneys, physicians, firemen, police officers, certified public accountants. I do not recall ever hearing a comment regarding discrimination in employment on account of a bankruptcy filing.

Likewise, as to licensing, we have represented hundreds of contractors and other individuals who must be licensed by the State of North Carolina. There has never been a hint of discrimination on account of bankruptcy filing. This can be seen quite clearly with the individual who has lost his or her drivers license as a result of having been found liable for an auto accident without casualty insurance.  Once the bankruptcy case has been filed, that individual can apply and obtain a license.

Fear of discrimination or reprisal by employers and governmental agencies on account of filing bankruptcy is wide spread.  Fortunately, the feared discrimination is far more imagined than real.