Bankruptcy Code Prohibits Employer Retaliation

Given the the numbers of personal bankruptcy filings in America, it is likely that a greater number of U.S. workers face the possibility of losing their jobs because of an employer’s bias against people who resort to bankruptcy protection. 11 U.S.C. §525(b) of the Federal Bankruptcy Code states that “no private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is a debtor under the Bankruptcy Act solely because such debtor is or has been a debtor under the Bankruptcy Act.” In many instances, employer retaliation may be based on a fear or belief that anyone who files bankruptcy is not trustworthy or financially responsible. In reality, the majority of people who file bankruptcy do it for reasons that were beyond their control.

The National Association of Consumer Bankruptcy Attorneys (NACBA) published a survey of bankruptcy lawyers which revealed that in the vast majority of cases, consumers are forced into bankruptcy by major and unforeseen expenses (joblessness at 39.6 percent and medical expenses/other medical costs at 33 percent) or combinations of factors (mortgage/home-related debt at 64 percent and increased credit card interest rates at 41.1 percent). Fewer than one in 10 cases (8.1 percent) handled by bankruptcy attorneys were linked to “discretionary spending” habits. According to the American Bankruptcy institute, U.S. consumer bankruptcy filings totaled 675,351 nationwide during the first six months of 2009. This represents a 36.5 percent increase over the 494,610 total consumer filings during the same period a year ago.

The law is clear, employers may not fire or otherwise retaliate against an employee because they filed bankruptcy.  The effect of an unwarranted termination on an employee who is already struggling under the weight of overwhelming debt is catastrophic. Unfortunately, many employers are not even aware of the existence of this law. If you know someone going through bankruptcy, make sure they are awate that their job cannot be legally taken from them because they seek bankruptcy protection. The Gomez Law Group represents and advises individuals affected by this rule.

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