Does Bankruptcy Lead to Discrimination?
For many individuals dealing with crushing debt, filing bankruptcy may be the best solution. Some are concerned about the stigma that may be associated with bankruptcy and worry that it could affect their employment, credit, and other aspects of their lives. If you are considering bankruptcy as a debt solution, you should know that the law provides protection against discrimination for individuals who declare bankruptcy.
What Are Your Protections Against Discrimination for Declaring Bankruptcy?
Under federal law, individuals who file for Chapter 7 or Chapter 13 bankruptcy have protections against discrimination in several areas:
- Employment: With some exceptions, employers are prohibited by law from firing employees or refusing to hire individuals for declaring bankruptcy. They are also prohibited from discriminating against a debtor’s family or friends. Even if a debt to your employer is discharged in bankruptcy, your employer cannot fire you on that basis.
- Government-issued licenses: The government cannot deny, suspend, revoke, or refuse to issue a new license on the basis of a bankruptcy filing, under the S. Bankruptcy Code. This law applies not only to driver’s licenses but also to licensing of professionals, such as real estate agents.
- Student loans: Protection under the law against discrimination for filing bankruptcy extends to student loans. Neither government entities nor private lenders can deny you a student loan because you declared bankruptcy.
How Did Protection Against Bankruptcy Discrimination Come About?
The federal government has the power to set bankruptcy laws and administer bankruptcy proceedings under the U.S. Constitution. Federal law against bankruptcy discrimination first came about in 1971 with the U.S. Supreme Court ruling in Perez v. Campbell. The Court ruled that a state cannot deny a driver’s license to a person because of an unpaid judgment that has been discharged in bankruptcy. Prompted by that ruling, Congress passed a law prohibiting discriminatory treatment for declaring bankruptcy at 11 USC Section 525.
What Are Your Options If You Believe You Have Been Discriminated Against?
The law provides protection against discrimination for debtors who declare bankruptcy. You cannot lose or be denied a job, a professional license, or a student loan because you filed for Chapter 7 or Chapter 13. If you believe you have been discriminated against because of your bankruptcy, consult with an experienced attorney as soon as possible. You may have a discrimination claim for compensation against the responsible party.
What Are Some Common Concerns About Filing Bankruptcy?
Many individuals in financial trouble have misconceptions about what will happen if they file bankruptcy. The following are answers to some common concerns:
- Will I lose my house and car?
Most of those who file for bankruptcy are able to keep their homes and automobiles when they file Chapter 7 or Chapter 13. Debtors are allowed exemptions of equity in their homes and automobiles that usually allow them to keep these assets in Chapter 7 bankruptcy. In Chapter 13, mortgage arrears and automobile loans are typically paid through the plan, after which monthly mortgage payments resume. - Will I ever get another credit card?
Many individuals who have filed for bankruptcy receive credit card offers after their debts are discharged in Chapter 7 bankruptcy. One way to start rebuilding your credit is with a secured credit card – you pay cash upfront to secure a line of credit.
Do You Need a Lawyer to File Bankruptcy?
The bankruptcy process can be complicated, and creditors may have attorneys to fight against you. Your best chance of successfully discharging your debts is to have experienced lawyers representing you. Our Phoenix bankruptcy attorneys at Hilltop Law Firm can help you utilize bankruptcy laws to your advantage.
We can provide tailored debt relief solutions to our clients. If you are overburdened with debt and need a fresh start, contact us at (602) 466-9631.