Bankruptcy law is clear. It is illegal for any employer to discriminate against an employee who is or has been in bankruptcy. Protection from discrimination covers every stage of the employment process. U.S. Code 525 gives debtors complete protection under the law from bankruptcy discrimination in the workforce.
Chapters 7, 11 and 12 bankruptcy filings remain on consumer credit reports for 10 years. A Chapter 13 filing stays for seven years. A bankruptcy report is documented in the "potentially negative items" section of a consumer credit report. Frequently, this section appears first on a consumer credit report.
The Bankruptcy Act
Filing bankruptcy should not affect a consumer's ability to secure employment. According to bankruptcy law, an employer cannot terminate, demote or act unfavorably toward an employee "solely" because the individual is or has been in bankruptcy. This includes the way in which work assignments are distributed, how promotions are awarded and how location transfers are issued.
Reasons to View a Consumer Credit Report
The only time an employer would have reason to check an employee's consumer credit file is if the individual is applying for employment or has provided written consent for the employer to view the individual's consumer credit file during the course of her employment with the company. If written consent is given by an employee, the instrument will remain on file at the company. Frequently, a human resource manager will record the date and time on which authorized personnel viewed or were privy to the credit information available in the report.
If an employee believes an employer has denied him employment because of a bankruptcy filing, he can file a petition in court alleging bankruptcy discrimination. In such cases, an employer must prove that one or more other verifiable reasons led to the firing of the employee or contributed to the employee not being hired for employment. For an employer to prevail in court, evidence must show that at least one other reason was at play in the hiring or firing decision.
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