Can I Be Fired for Filing Bankruptcy?
There’s one topic that people worry about… and maybe they shouldn’t.
What are the chances a person gets fired for filing for bankruptcy? The federal rule on point is 11 U.S. Code § 525 - Protection against discriminatory treatment. This law makes it illegal for an employer to fire you, or discriminate against you in your job, just because you filed for bankruptcy, are in a bankruptcy case, or had debts discharged in bankruptcy.
Let’s work though this.
Q: Bob works for Serious Credit Union. Bob has a credit card with SCU, but is behind on his payments to the point where he is now delinquent. Bob files for bankruptcy, which triggers the automatic stay. Because of this, SCU sends Bob’s attorney a letter saying that SCU will no longer offer Bob banking services.
A: SCU hasn’t done anything wrong because SCU’s policy has nothing to do with Bob’s job. Refusing to offer services after causing SCU a loss is a common event in bankruptcy. I’ve seen this plenty of times. Credit Unions, like regular depository institutions, are owned by members. Management has a fiduciary responsibility to their customers (i.e. shareholders).
Q: SCU’s branch manager has a meeting with Bob. The branch manager tells Bob that his bankruptcy is creating problems for SCU and that he thinks Bob should pay his credit card off and that the credit should not be a part of his bankruptcy.
A: The branch manager has violated the automatic stay (11 U.S. Code § 362) by trying to collect on a debt during a bankruptcy. The branch manager hasn’t necessarily violated 11 U.S. Code § 525, but you can at least argue that Bob is being treated differently.
Q: The bankruptcy case is now closed. SCU’s branch manager is upset that Bob took advantage of the credit union and tells Bob that he cannot be trusted with customer funds because his bankruptcy case amounted to theft. SCU’s branch manager tells Bob that he isn’t a team player and to clean out his desk.
A: SCU’s branch manager violated 11 U.S. Code § 525 (Protection against discriminatory treatment) because he terminated Bob on the basis of Bob’s bankruptcy. SCU and the branch manager are in violation of federal law. The fact that the case is closed doesn’t matter. Here, the fact that Bob had his debt’s discharged (including his SCU credit card debt) and that he got terminated on that basis is what seals the violation.
Q: SCU’s branch manager thinks Bob is an asshole for filing a bankruptcy case. The branch manager is no longer friendly to Bob. As it turns out, Bob is an asshole but it is actually because of his poor performance and aggressive attitude. The branch manager tells Bob that he isn’t a team player and that he needs to clean out his desk.
A: SCU’s branch manager is justified in terminating Bob, and as he did not do so because of the bankruptcy, there is no illegality. The fact that Bob is an asshole is irrelevant to the analysis. Bob’s aggressive attitude is a bit of a red herring because attitudes can be misunderstood. Bob’s poor performance, however, means that SCU can terminate him.
Let’s unpack that last scenario. The branch manager’s subjective beliefs aren’t actually relevant here they are not the reason cited for the termination. If SCU can show that Bob performed poorly at his job, then Bob is unlikely to prevail in court. SCU has every right to terminate Bob for poor performance regardless of his bankruptcy case.
Bob’s best bet is to document everything, get the stated reasons for his termination in writing, and speak to an attorney about the situation. Bob needs to do this quickly because there are statute’s of limitation.
This post is for general informational purposes and isn't legal advice for any specific situation. If you're facing financial difficulty and considering bankruptcy in Washington State, contact Spalding Law Firm PLLC for a consultation.
