Employment Law Blog

Laws protecting debtors from employment discrimination, more specifically, failure to hire, promote or termination after filing bankruptcy, have been deemed illegal discrimination pursuant to both Federal and state law.

No employer is allowed to terminate an employee or discriminate against said employee solely because they are bankrupt or a debtor. This includes an individual who is or was a debtor under the Bankruptcy Code, a debtor or bankrupt individual under the Bankruptcy Act, or one associated with such debtor or bankrupt individuals. 11 U.S.C.A. § 525(b)(1). This also includes an employee who is in the middle of a bankruptcy proceeding but it has yet to commence. 11 U.S.C.A. § 525(b)(2).An employee who has filed for bankruptcy can be discharged if their employer can show a real legitimate reason for their termination. Laracuente v. Chase Manhattan Bank, 891 F.2d 17 (1st Cir. 1989). This filing of bankruptcy must be the sole reason for the employer’s discrimination in order for the employee to recover. 11 U.S.C.A. § 525(b).