Bankruptcy and Discrimination

Q: Can an employer terminate a debtor's employment solely because the person was a bankruptcy debtor or failed to pay a debt that was discharged in bankruptcy?

A: 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 against bankruptcy debtors:

• 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 (hiring, promotion, unequal treatment, termination, etc.) if the discrimination is based solely on the bankruptcy filing.