As bankruptcy filings in California continue to rise, a growing concern among individuals we consult is that they may be fired or face other retaliation by their employer for filing for bankruptcy protection.
In the State of California, like most other states, employment is considered to be “at will.” This means that an employee can generally be fired for any reason or even no reason, as long as it is not done in violation of certain public policy protections (more on this below). Likewise, an employee is free to quit their job with or without notice to the employer.
However, various state and federal laws limit an employer’s ability to fire employees or take any punitive or retaliatory action based on the employee’s membership in a protected class. These protections include age, disability, gender, marital status, race and national origin. Most individuals are unaware that the bankruptcy code also protects against employment discrimination.
The Bankruptcy Code Prohibits Discrimination Based on Bankruptcy Filing…
The Bankruptcy Code, at 11 U.S.C. sec. 525(b), states that “No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt.”
The law further specifies that a person can qualify for the protections of this provision if:
1. The person is or has gone through a bankruptcy proceeding;
2. The person was insolvent, either before filing for bankruptcy or while the petition was pending; or
3. The person had not paid a dischargeable debt.
The purpose of this protection is to ensure that people seeking a “fresh start” through bankruptcy are able to maintain their employment.
Your Employer is Unlikely to Know You Filed Chapter 7 Bankruptcy Unless You Tell Them…
Although the aforementioned protections are important to ensure that employers do not discriminate against individuals seeking a fresh start through bankruptcy, it is unlikely your employer will know that you have filed unless you tell them.
Generally speaking, during your bankruptcy proceedings your employer will not be notified that you have filed a Chapter 7 bankruptcy and, therefore, will not know unless you decide to tell them (or unless they are a creditor of yours in any capacity).
However, please note that if you are filing a Chapter 13 bankruptcy then your employer will most likely be notified of your filing through a wage order prepared by your attorney and served upon your employer by the bankruptcy court. The purpose of the wage order is to fund your bankruptcy repayment plan in the Chapter 13. For more information on how a Chapter 13 bankruptcy works, contact an experienced bankruptcy attorney.
In summary, your employer will probably not know that you are filing for Chapter 7 bankruptcy protection unless you decide to tell them. Furthermore, if your employer does somehow learn of the filing or attempt to retaliate against or fire you because of the bankruptcy, you can avail yourself of the protections provided by the bankruptcy code. Individuals that are subjected to unlawful bankruptcy discrimination may receive back pay, including fringe benefits and reinstatement, and may also recover damages for emotional distress.
If you need assistance with unpaid medical bills, preventing foreclosure , preventing repossession, reducing financial liabilities, stopping wage garnishments, preventing collection calls, debt settlement, reducing or eliminating tax debt, and or rebuilding your credit consider consulting with us for your options. Chirnese L. Liverpool assists clients with filing for bankruptcy in California as well as all of Nevada. Our office represents clients with: bankruptcy court, filing for bankruptcy, chapter 7 bankruptcy, and chapter 13 bankruptcy representation. We can be reached at (818) 714-2200.
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