Understandably, when a person is facing a possible Bankruptcy filing they often consider how a case may affect their job. The good news is that it is highly unlikely a Bankruptcy filing will cause you to lose your job or have any effect whatsoever on your job. Congress has considered this issue and deemed it so important that they have enacted a law prohibiting the termination of employment or discrimination regarding employment solely because an employee filed a Bankruptcy case. This prohibition is found in Section 525(b) of the Bankruptcy Code. In addition, even if there was not a legal prohibition, most employers are not going to terminate a valuable employee because they filed a Bankruptcy case.
However, while an employer may not terminate an employee who has filed for Bankruptcy, the next question is whether the employer can deny employment to an applicant who has filed for Bankruptcy? If the employer is a private, non-government employer, most courts have held that Section 525(b) does not apply to hiring decisions. Since many private businesses do credit checks as part of their pre-employment screening, it is possible that applicants may be denied employment if they have a Bankruptcy or other negative entries on their credit report. The rules are different for government employers. Pursuant to Section 525(a), a governmental unit may not terminate the employment of, or deny employment to, a person who has filed a Bankruptcy case.
Hopefully this information will alleviate any fears or worries that people naturally have when facing a possible Bankruptcy case. If a person believes they have been terminated or discriminated against merely because they filed a Bankruptcy case, they should contact their Bankruptcy lawyer to discuss the issue.