Can I lose my job if I file bankruptcy? Can someone refuse to let me rent their apartment?
Adam Mack, J.D.
When considering bankruptcy, it’s important to look at how it might affect every aspect of your life. Some aspects are more obvious than others; people generally know that bankruptcy has an impact on their credit score and can hinder their ability to purchase some items or open credit accounts. Other aspects are not as well-known, including the possibility of discriminatory treatment.
Employers
Fortunately, there are protections mandated by federal law for people who file [1], no public or private employer can discriminate against people who have filed bankruptcy. This means they cannot terminate a person’s employment, refuse to promote a person, or decline to hire someone solely because he or she filed bankruptcy. Of course, employers are free to terminate, promote, or hire an individual based on other criteria, even if that individual has filed bankruptcy, and they are allowed to ask a job applicant if he or she has ever filed bankruptcy.
Loans
Private lenders can base their loan criteria on credit scores which, as noted above, are impacted by bankruptcy. This includes refusing to issue loans to people who have filed bankruptcy or charging higher interest rates. The big exception to that are student loans. Government or private lenders who issue student loans (as defined by statute [2]) cannot deny a loan to students simply on the basis that they (or someone they associate with, such as a co-signer or spouse) have or are filing bankruptcy.
Other Private Businesses or Individuals
Unfortunately, credit history (including bankruptcy) is used in scenarios other than simply issuing credit. Landlords will sometimes look at credit history when considering a tenant’s application. Car and other insurance companies also sometimes factor in credit history when determining rates. Such discrimination is permitted by law.
The Most Important Part
Almost always, the credit history of a person considering bankruptcy is already severely damaged, and the permitted discriminatory practices are often used against the debtor whether or not he or she files bankruptcy. Whether or not a debtor files bankruptcy, it will take years to rebuild his or her credit. For many people, the fresh start that comes with bankruptcy allows them to go about rebuilding their financial lives in peace, without being hounded by creditors or feeling like they’re drowning in obligations they can’t pay.
Remember, the purpose of bankruptcy is two-fold: to give the debtor a fresh start and to give the creditors their fair share of the bankruptcy estate. Above and beyond the bankruptcy process itself, federal law provides many protections for the and debtor to prevent discrimination and to allow that fresh start.
[1] 11 USC § 525 states that it governs “Except as provided in the Perishable Agricultural Commodities Act, 1930, the Packers and Stockyards Act, 1921, and section 1 of the Act entitled “An Act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1944, and for other purposes,” approved July 12, 1943″
[2] 11 USC § 525(c) clarifies that the student loan program is one that operates “under title IV of the Higher Education Act of 1965 or a similar program operated under State or local law.”
Disclaimer
These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!
