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Bankruptcy & Employment Discrimination: Can I Lose My Job after I File?

Updated on February 13, 2013

Employment Discrimination After Bankruptcy?

If you’ve made the decision to file for bankruptcy, you’re likely aware that your life is about to undergo major changes. While bankruptcy does provide you with protection and relief, you will likely have many questions about your bankruptcy status and how it protects you. Your Minneapolis bankruptcy attorney can assist you in navigating this difficult process.

One of the most immediate concerns involves your job status. Already stretched financially, you may have heard the rumor that an employer can and will fire you once they’ve found out you have filed for bankruptcy.

Bankruptcy Law Protection

You are protected under Section 525(b) of the U.S. Bankruptcy Code. According to the code, it is illegal for your employer to fire you based upon your bankruptcy filing status. If you feel that your employer fired you directly because of your bankruptcy status, contact a Minnesota bankruptcy lawyer immediately regarding your status of protection under the law.

Privacy in Bankruptcy

In some instances, your employer may not even know (or receive notification) of your bankruptcy status but that depends on the type of bankruptcy you file and whether your wages must be garnished for repayment under your bankruptcy’s terms. In some cases, employers are less likely to find out about your financial woes because under bankruptcy law, creditors are unable to call and harass you, especially at your place of employment.

If the court garnishes your wages (receives money from your paycheck before you are paid), the court will notify your payroll department. The payroll department must have the proper information—the amount of wages they should garnish and where they are to send the wages. Your employer is legally obligated to comply. This typically occurs only in Chapter 13 bankruptcy cases.

At-Will Employment

Most employers offer jobs under “at-will employment” terms. This means that your employer can release you from employment at any time without explanation. Minnesota and most other states allow for this type of employment. This makes it particularly tricky for you to prove that you have been fired due to bankruptcy. If this is a major concern, keep copies of all correspondence between yourself and your employer regarding your bankruptcy status. Document all conversations and present this information to your Minneapolis bankruptcy law expert.

On a related point, if you are fired for a non-bankruptcy related reason under an at-will clause, you should know that Section 525 of the U.S. Bankruptcy Code also prohibits discrimination of potential employees due to bankruptcy filing status.

Bankruptcy can cause many changes in your life once you decide to file, but it also offers the ability for you to gain a fresh start. If you communicate frequently with your Minneapolis or St Paul bankruptcy attorney, understand the bankruptcy code and how it protects you and keep accurate records, you will experience progress and relief from your financial burdens.


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