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Could I lose my job if I file for personal bankruptcy?

In last week's post we talked about the issue of employers firing or refusing to hire a person due to negative information in the person's credit report. As we discussed then, the Fair Credit Reporting Act does not protect a consumer from this form of employment discrimination. Massachusetts workers facing severe financial challenges are thus at risk of becoming trapped in a downward spiral of unemployment and increasing debt.

For people in this situation, filing for bankruptcy may provide a measure of employment security. Unlike the situation with credit reports, there is a federal law that prohibits employer discrimination on the basis of a bankruptcy filing.

This law says government employers cannot refuse to hire, fire or discriminate against an individual on the basis of a prior bankruptcy or failure to pay a dischargeable or discharged debt. It also prohibits private employers from firing or discriminating against an employee for those reasons, but does not on its face prevent private employers from refusing to hire. Some federal courts have ruled that private employers can refuse to hire a person due to a past bankruptcy filing. Despite this omission, the law provides some meaningful protections for employees who have filed for bankruptcy.

Filing for bankruptcy has other benefits, of course. It stops creditor harassment immediately. It can eliminate debt and stop foreclosure and repossession. Although it will appear on the debtor's credit report, it ultimately puts the debtor in a position to begin repairing his or her credit. An experienced debt relief attorney may be able to help a debtor decide if personal bankruptcy is the right solution for his or her situation.

Source: 11 U.S.C. § 525(a) and (b), accessed May 21, 2016

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