Can You Be Fired For Filing Bankruptcy?

No Need to Worry That You Will Be Fired for Filing Bankruptcy!

fired for filing bankruptcy

Can I Be Fired for Filing Bankruptcy in Michigan? No!

Employers may not discriminate against employees who have filed for bankruptcy under Section 525 of the Federal Bankruptcy Code. This applies to either private employers or governmental employers under different sub-sections of 525, but, in either case, employers cannot discharge, fire, or otherwise discriminate against employees who have filed for Chapter 7 or Chapter 13 bankruptcy. (This is, by the way, the same section of the Bankruptcy Code that forbids lenders from denying student loans to applicants on the basis that they have declared bankruptcy.) Therefore, if your current employer discharges you because you have declared bankruptcy, that employer is in violation of Federal law. However, any action taken against filing employees must be demonstrably related to the bankruptcy. If this can be proven, an employee who was suffered workplace discrimination may have a private cause of action.

Can I Be Denied New Employment for Filing Bankruptcy? Potentially.

What is less cut-and-dry is the denial of employment by prospective employers. When applying for a new job, many potential employers request your authorization to pull and inspect your credit-report. This section of the Bankruptcy Code has been interpreted by courts to apply generally only to current employers and not prospective employers. Litigation on this matter in Bankruptcy Courts across the country has resulted in case-law also allowing differing levels of protection in this regard to those seeking public (government) employment vs. private employment. Most of this case-law has arisen outside of Michigan and outside of the 6th Circuit Court of Appeals, which is the Federal appeals jurisdiction responsible for reviewing bankruptcy court appeals arising in Michigan. Thus, if you are filing for bankruptcy in Michigan, you are at least moving forward in a jurisdiction which has not decided negatively against employees in such matters.

Can I Be Fired for Filing Bankruptcy? The Practical Truth: "Fear Is the Mind-Killer"

The practical truth is that, although litigation has developed regarding denial of employment and loss of employment due to bankruptcy filing on occasion around the U.S., you are not likely to be fired for filing bankruptcy. For the most part, fear of termination of employment due to bankruptcy filing, along with fear of loss of licensure or security clearance and loss of reputation, is just that: a fear. A fear with some reasonable basis but one which, on a statistical level, is unlikely to materialize and which should not prevent you from seeking a legal and ethical course of action which may be necessary to keep food on the table for your family. The Michigan bankruptcy attorneys of The Hilla Law Firm, PLLC are not aware of any past or present client employed in any industry to have suffered a loss of employment due to a bankruptcy filing. In particular, for a Chapter 7 bankruptcy, your employer is unlikely to know that you've filed at all if you've already been hired, unless you tell them. In a Chapter 13 bankruptcy, your employer may know that you've filed because your Chapter 13 plan payment, here in the Eastern District of Michigan, is required to be drawn directly from your paycheck, but, in our experience, employers do not often care. And, if they are a larger corporation, it is highly likely that they have other employees already in bankruptcy as well and they are quite used to the idea. In Frank Herbert's classic science-fiction novel Dune, hero Paul Atreides finds the courage to take actions that need to be taken in order to combat an evil by reciting the manta, "Fear is the mind-killer" to remind himself that fear is something that need not always paralyze. Fear is a mental roadblock only, one which can be overcome by confidence, faith, and bravery. Fear of the world ending due to a bankruptcy filing when creditors may be threatening foreclosure, lawsuits, garnishment, repossession of a vehicle, and destruction of what is left of your personal credit is something that can be easily overcome with a little knowledge and a little courage. Michigan bankruptcy attorneys The Hilla Law Firm, PLLC is happy to help you with both. If you are a Michigan resident and are considering filing for bankruptcy, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.

Schedule a Free Consultation

"See what past clients are saying about how we helped them!"

I cannot say enough about how well we were treated by John. He was very knowledgeable about the entire process and kept us informed throughout; there were no surprises... I would recommend John to anyone, knowing he would do as good a job for them as he did for us. David
See More Case Studies