Sometimes, when it comes to the law, things are not as straight forward as they seem. Take, for example, the question of whether or not a person can be denied employment. The Bankruptcy Code covers this issue in Section 525.
When it comes to whether or not you can be denied a job because you filed bankruptcy, the answer is pretty clear cut: no. Section 525(a) states:
…a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, 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.
Section 525(b) applies to private employers and states:
No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
As I read “discriminate with respect to employment,” an employer would not be able to deny someone a job because she filed bankruptcy. However, it is looking more and more like the courts are not going to stand in the way of private employers refusing to hire someone because they filed bankruptcy. So far, three appellate circuits have given employers the thumbs up and allowed them to deny jobs to people who have filed.
This can be a big deciding factor for someone who is thinking about bankruptcy. It’s important to realize that, unless your prospective employers asks whether you have filed bankruptcy (to which you should answer truthfully) or runs a credit report on you, it’s likely that the employer will never know. Whether this should be a deciding factor for you depends on your personal situation and whether you’re in the kind of field where employers are concerned with your financial history.
You can read about some recent court decisions that have upheld employers’ discrimination here.