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Bankruptcy Job Discrimination Is Illegal

Nov. 2, 2010

In our last blog we covered the new Oregon Job Applicant Fairness Act, which made it illegal for most employers in Oregon to use a job applicant’s credit history in making hiring decisions. Besides this state law, there’s also a federal law, which means it is enforceable all over the country. Besides that, this federal law is better in a bunch of other ways. This blog shows you why.


A lot of our clients are unemployed. They ask us whether they can be denied employment if they file a bankruptcy. Many of our employed clients ask us whether they could lose their jobs if they file a bankruptcy.

The federal law makes it illegal for an employer to terminate your employment or to “discriminate with respect to [your] employment” IF the ONLY reason for treating you differently is that you:

1) filed a bankruptcy case, or

2) were insolvent (you owed more than you owned), or

3) did not pay a debt that is dischargeable (written-off) in your bankruptcy case.

So your employer cannot fire you or treat you differently simply because you filed a bankruptcy, or because you did not pay a debt that your bankruptcy forgave you from paying.

Applicable to All Employers

This federal law applies to all governmental employers—federal, state, county, city—and all private employers. The statute makes no exceptions, unlike Oregon’s new law which excludes from the law most banks and credit unions, and law enforcement and airport security employers.

License and Permits

The federal law adds a huge extra angle: governmental agencies are prohibited from denying, revoking, or suspending licenses, permits, or grants because of a bankruptcy, or because of an unpaid debt discharged in bankruptcy. This most commonly applies to your driver’s license, which the DMV would usually be able to revoke if you had a judgment against you for an unpaid debt for damages you caused in a vehicle accident. The discharge of this debt in bankruptcy prevents this loss of your drivers’ license.

This provision may also apply to professional licenses and other governmental permits and grants. Some other examples of what this important provision has been applied to include debtor’s rights to keep or receive their government contracts, school transcripts, public housing, utility service, and agricultural subsidies. If anything like this seems to apply to you, be sure to tell us about it so we can protect it for you.

Bankruptcy or Discharged Debt as the Sole Reason

The practical problem is that the federal law says that the forbidden behavior, like job discrimination, is only illegal if your bankruptcy or a discharged debt is the SOLE reason for that behavior. Of course this can be difficult to prove. In our experience, most employers do not want to risk a lawsuit and so tend to stay clear of violating this federal law. Plus, employers recognize that in this bad economy, more than usual, countless good people need to be filing bankruptcy through little or no fault of their own. An employer who does not understand this is losing out on a substantial part of the labor pool, besides violating the law.

Portland Bankruptcy Law Group has the experience and knowledge to handle your case. Our bankruptcy attorneys are extremely familiar with and are well versed in all aspects of bankruptcy law. Contact us today!