May a private employer discriminate against an applicant on the basis of a bankruptcy discharge listed on the applicant's credit report? Do you think this sort of thing happens from time to time? Explain why you feel it might be important for debtors to be afforded protection in this area

Question

What will be an ideal response?

Answer 1

Bankruptcy Code 11 U.S.C. § 525 prohibits private and public (government) employers from terminating an active employee because they sought protection under the bankruptcy laws. Under 11 U.S.C. § 525, federal, state, and local governments cannot deny, revoke, suspend, or refuse a license, permit, charter, franchise, or similar grant solely because the client has a history of bankruptcy. This does not mean that a client cannot be denied employment on other grounds. Private employers, however, are not held to the same standard. A private employer may not terminate the employment of an employee who has sought bankruptcy protection. The statute, however, does not protect prospective employees during the screening process for a new job when they are interviewing with private employers. The issue of whether it is considered discriminatory to deny a person employment based on a bankruptcy is being litigated across the United States. Although some courts have found that employers cannot discriminate based on a history of bankruptcy because it denies one a fresh start, other courts have ruled in favor of the employer. Ultimately, this issue will have to be decided by the United States Supreme Court unless the statute is amended to protect applicants. The best action for a client to take when the employer will conduct a credit check is to address the issue of the bankruptcy early on in the job interview. This allows the client to be up-front with the employer and, given the recent recession, it would not be the first time an employer has had to deal with the issue.