Can My Employer Discriminate Against Me for Filing Bankruptcy?

Filing Bankruptcy can be a challenging and stressful experience, often accompanied by concerns about how it might affect various aspects of your life, including your employment. Many individuals worry that declaring bankruptcy could jeopardize their job security or lead to unfair treatment in the workplace.

Understanding Bankruptcy and Employment Law

Before delving into the specifics of bankruptcy and employment discrimination, it’s essential to have a basic understanding of both bankruptcy and employment law.

Bankruptcy: A Fresh Start

Bankruptcy is a legal process designed to help individuals and businesses overcome overwhelming debt and achieve a fresh financial start. There are several types of bankruptcy, with the most common for individuals being:

• Chapter 7 Bankruptcy: Also known as “liquidation bankruptcy,” this type involves selling non-exempt assets to repay creditors and discharging remaining eligible debts.
• Chapter 13 Bankruptcy: Often called “reorganization bankruptcy,” this option allows individuals with regular income to develop a plan to repay all or part of their debts over three to five years.

Employment Law: Protecting Workers’ Rights

Employment law encompasses a wide range of federal, state, and local laws that govern the relationship between employers and employees. These laws aim to ensure fair treatment in the workplace and protect workers from various forms of discrimination and unfair practices.

One of the most significant pieces of legislation in this area is the Civil Rights Act of 1964, which prohibits discrimination based on race, color, religion, sex, or national origin. Subsequent laws have expanded these protections to include factors such as age, disability, and genetic information.

Bankruptcy and Employment Discrimination: A Legal Overview

When it comes to bankruptcy and employment, federal law provides specific protections for individuals who have filed for bankruptcy. These protections are primarily outlined in Section 525 of the Bankruptcy Code, which prohibits discrimination against individuals solely because they have filed for bankruptcy.

Key aspects of these protections include:

• Application to both public and private employers.
• Prohibition of discrimination in hiring, firing, and other employment decisions.
• Protection against harassment or retaliation related to a bankruptcy filing.

It’s important to note that these protections apply to both current and potential employees. This means that employers cannot refuse to hire someone solely because they have filed for bankruptcy in the past.

Common Misconceptions

Despite these legal protections, there are several common misconceptions about bankruptcy and employment discrimination:

• Myth: Employers can fire you for filing bankruptcy.
• Reality: Federal law prohibits termination solely due to bankruptcy filing.

• Myth: Bankruptcy will always show up on a background check.
• Reality: While bankruptcy may appear on some background checks, many employers don’t specifically look for this information.

• Myth: You must disclose your bankruptcy to your employer.
• Reality: In most cases, you are not legally obligated to inform your employer about your bankruptcy filing.

What Actions Can My Employer Not Take?

Under federal law, employers are prohibited from taking various adverse actions against employees solely because of a bankruptcy filing. These prohibited actions include:

• Termination: An employer cannot fire you simply because you’ve filed for bankruptcy.
• Demotion: Your position within the company cannot be lowered due to your bankruptcy status.
• Reduction in pay: Your salary or wages cannot be cut as a result of filing for bankruptcy.
• Discrimination in promotions, raises, or benefits: Employers cannot use bankruptcy as a reason to deny you promotions, salary increases, or employee benefits.
• Harassment or retaliation: It is illegal for employers or coworkers to harass or retaliate against you because of your bankruptcy filing.

Documenting Discriminatory Actions

If you believe you are experiencing discrimination due to your bankruptcy filing, it’s necessary to document any potentially discriminatory actions. Keep a detailed record of:

• Dates and times of incidents
• Names of individuals involved
• Specific actions or comments made
• Any witnesses present
• How the action affected your employment or work environment

This documentation can be invaluable if you need to file a complaint or take legal action.

Exceptions to the Rule: When Bankruptcy May Affect Employment

While federal law provides strong protections against bankruptcy-related discrimination, there are some situations where bankruptcy can potentially affect employment:

• Job performance issues: If your financial difficulties are impacting your ability to perform your job duties effectively, your employer may have grounds for taking action.
• Inability to fulfill job requirements: Some positions, particularly in the financial sector, may require employees to maintain good credit or avoid bankruptcy. In these cases, a bankruptcy filing could potentially disqualify you from the position.
• Violation of company policies: If your bankruptcy filing results in you violating specific company policies or procedures, your employer may have legitimate grounds for taking action.
• Security clearances: In some government or high-security positions, a bankruptcy filing could potentially affect your ability to maintain necessary security clearances.

It’s important to note that in these situations, the employer’s actions must be based on legitimate business reasons related to job performance or requirements, not solely on the fact that you filed for bankruptcy.

Protecting Your Rights: What to Do If You Believe You Are Being Discriminated Against

If you believe you are experiencing discrimination due to your bankruptcy filing, there are several steps you can take to protect your rights:

• Document everything: As mentioned earlier, keep detailed records of any potentially discriminatory actions or incidents.
• Review your company’s policies: Familiarize yourself with your employer’s policies regarding discrimination and grievance procedures.
• Address the issue internally: If appropriate, consider discussing the issue with your supervisor or human resources department.
• Seek legal advice: Consult with an experienced attorney who can help you understand your rights and options.
• File a complaint: If necessary, you can file a complaint with the Equal Employment Opportunity Commission (EEOC) or your state’s fair employment practices agency.

Filing a Complaint with the EEOC

The Equal Employment Opportunity Commission (EEOC) is the federal agency responsible for enforcing laws against workplace discrimination. To file a complaint:

1. Contact the EEOC within 180 days of the discriminatory action (or 300 days in states with their own anti-discrimination laws).
2. Provide detailed information about the alleged discrimination.
3. The EEOC will investigate your claim and may attempt to mediate between you and your employer.
4. If the EEOC finds evidence of discrimination, they may file a lawsuit on your behalf or give you the right to sue your employer.

Remember that state and local fair employment practices agencies may also be able to assist you with discrimination claims.

Work with a Skilled and Knowledgeable Alabama Bankruptcy Lawyer

Filing for bankruptcy is a significant financial decision with far-reaching implications, but it’s critical to understand that federal law provides strong protections against employment discrimination based on bankruptcy status.

If you’re considering bankruptcy or believe you’re experiencing bankruptcy-related employment discrimination, it’s essential to seek professional legal advice. Padgett & Robertson, a reputable bankruptcy law firm in Alabama, is focused on helping individuals navigate complex legal issues related to bankruptcy and other areas of the law.

Contact us today for a personalized consultation to discuss your options.