Employment Discrimination and Bankruptcy

A common question I receive is whether an employer can deny you a job or discriminate against you because of filing bankruptcy.  Bankruptcy Code Section 525(a) provides that a governmental unit "may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discrimate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act."  http://codes.lp.findlaw.com/uscode/11/5/II/525 

The above section protects an individual's rights if they are denied or terminated from employment by the government on the basis of having filed a bankruptcy case.  An individual cannot be discriminated against solely on the basis of being bankrupt even before their case is filed.  A job application also cannot be denied solely on the basis of an individual having filed for bankruptcy.

Bankruptcy Code Section 525(b) provides 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, solely because such debtor or bankrupt-(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act."  http://codes.lp.findlaw.com/uscode/11/5/II/525 

The above section prevents a private employer from denying a job application or terminating you solely because of filing bankruptcy.  Even if your spouse or family member has filed bankruptcy then the employer cannot terminate you on the basis of your association with a bankruptcy filer.

An individual is eligible for employment discrimination protection if they have filed for bankruptcy, become insolvent (broke) even before filing for bankruptcy, or if they did not pay a dischargeable debt.  The Section 525 protection against discrimination helps to ensure that individuals going through the bankruptcy process are able to retain their jobs to avoid incurring further debts.

In order to take advantage of the protection against discriminatory treatment you must have evidence against your employer.  The debtor must prove that their bankruptcy status is the only reason for termination or for the employer denying a job application.  The debtor must show that they were terminated or denied employment based soley on a bankrupty filing, insolvency, or failure to pay a debt.  Victims of unlawful bankruptcy discrimination may be entitled to compensation for it and possibly for emotional distress.  If you believe you are being discriminated against due to bankruptcy status it is imperative to maintain a record of your performance that could help disprove other potential reasons for termination.

For more information about bankruptcy in Kansas City, please visit The Smalley Law Firm's website at http://www.thesmalleylawfirm.com

Leases and Bankruptcy

Renters often inquire about what will happen to their residential (apartment) lease when they file bankruptcy.  The bankruptcy code imposes an "automatic stay" on all collection and enforcement proceedings upon filing of the bankruptcy petition.  This stay prevents eviction proceedings or other actions for possession or monetary damages without the bankruptcy court's permission as long as the debtor/tenant continues to timely perform all obligations of the lease (such as continuing to pay your rent on time).

Under Chapter 7 the trustee has 60 days after the debtor files bankruptcy to reject or accept the lease.  Generally, the trustee will not accept, or reaffirm, the lease because most leases have no value to the trustee.  The only exception would be a lease with a below market lease payment where the trustee believes someone may pay for the assignment of the lease.  For example, if your rent is $500 a month but the trustee believes that he or she could lease the apartment for a significantly higher monthly amount, then the trustee may accept your lease.

If the the trustee does not accept the lease then the debtor/renter can either reject (terminate) or assume (continue) unexpired leases.  The lease can only be assumed if the debtor cures any defaults (such as a past due amount owed to the landlord).  If the debtor rejects the lease, the entire lease obligation is treated as a pre-petition dischargeable debt and the landlord can evict the debtor any time as the lease is no longer in effect.  However, the landlord may still accept the debtor's monthly rent payments and the debtor's occupancy.

Section 362(b)(22) of the Bankruptcy Code provides that the automatic stay automatically ceases 30 days after filing bankruptcy.  Then the landlord is permitted to continue any eviction, unlawful detainer or similar proceeding against the debtor/tenant where the landlord obtained a judgment for possession against the debtor/tenant prior to the bankruptcy filing.  However, the debtor/tenant can challenge the end of the automatic stay pursuant Section 362(b)(22) under certain specific circumstances.  Additionally, even if the debtor is evicted after the stay is lifted, the debtor will have no further personal liability for any rent payments not made.  For additional information please contact The Smalley Law Firm at (913) 601-3549 for a free initial consulation or visit our website at http://www.thesmalleylawfirm.com

Will Bankruptcy Stop Wage Garnishment?

A common question I receive is whether filing bankruptcy will stop a creditor from garnishing wages.  The short answer is "yes".  The "automatic stay" that applies when bankruptcy is filed "stays"  or prevents all collection activities.  Therefore, during bankruptcy creditors cannot contact you about the debt, cannot file a lawsuit against you on the debt and cannot attempt to collect on the debt.

Wage garnishment is considered a "collection" under the bankruptcy code.  As a result, a creditor cannot start a garnishment or continue to try to attempt to garnish your wages without violating the "automatic stay" of all collection activities under the bankruptcy code.  If your wages have been garnished or you believe that your wages are going to be garnished you should consider speaking to an experienced Kansas City bankruptcy attorney, such as myself, Cary S. Smalley of The Smalley Law Firm, about your legal rights.  For more information please visit http://www.thesmalleylawfirm.com