Filing for bankruptcy is an emotional decision for most who choose it. There are often conflicting feelings of relief and concern, and those who file may experience fear about how others will view them after personal bankruptcy. While bankruptcy has lost much of the stigma it used to hold, it is vital to understand the legal implications of any discrimination you may face after discharge. In this article, we will discuss the laws in place to protect from most types of post-bankruptcy discrimination.
Government Programs and Bankruptcy Discrimination
Fact: All federal, state and local governments are prohibited from denying, revoking, or suspending a license, permit, charter or franchise because of a bankruptcy filing. They cannot refuse to renew any status solely because of a recent bankruptcy.
The government also cannot use your bankruptcy as a basis for:
- Denying a job
- Firing an employee
- Denying or terminating public benefits
- Evicting from public housing (Section 8 voucher have special provisions that may affect this protection)
- Denying access to a driver’s license
- Denying or refusing renewal of a state liquor license
- Denying approval for commercial or professional contracts
- Withholding educational transcripts
- Denying student loans
The law guarantees essential protections, but it does not protect debtors from all the potential negative consequences of a bankruptcy filing. One of the most common examples is that lenders are permitted to consider your bankruptcy filing when considering an application for a government loan or line of credit.
Bankruptcy Discharge Ends Most Action
Generally speaking, once any government-related debt has been discharged, any actions arising from that debt are also terminated.
Remember that government denials based solely on your bankruptcy are the only denials that are prohibited. Individuals may still be denied a loan, job, or housing for reasons unrelated to the bankruptcy. For instance, they may determine that you do not have the ability to repay a loan. While this might seem discriminatory based on your past, they are most likely looking at your current situation and future creditworthiness.
Preventing Discrimination by Private Entities
The ability of private parties to discriminate against an individual post-bankruptcy can involve some complexity, and it depends upon the context of their decision.
Private employers are not permitted to fire or discriminate against someone based only on a bankruptcy filing. While the law expressly prevents companies from firing those who have been through bankruptcy, there is no clear consensus on whether employers can refuse to hire someone in that situation.
However, other private sector forms of discrimination are not considered illegal. An individual looking to lease an apartment may be turned down if the landlord runs a credit check and is informed of the bankruptcy. Their refusal to rent to you is based on the fact that you could not pay your bills in the past. However, someone who files for bankruptcy in the midst of a lease cannot be evicted solely because of a bankruptcy proceeding.
Similarly, a private employer may deny employment because of your credit history—not because of bankruptcy.
While it is not uncommon for those who have filed for bankruptcy to feel ashamed or tentative about starting over, the feeling is largely unfounded. Bankruptcy no longer holds a negative stigma, and many people take advantage of the opportunity to get a fresh financial start. You have every right to move forward with a new life – so if you feel that someone is treating you unjustly based on a past bankruptcy, call an experienced bankruptcy attorney for advice.
Richard V. Ellis is a Sarasota bankruptcy attorney who has been helped over 5,000 individuals and businesses navigate the complexities of bankruptcy.