Bankruptcy Discrimination – Employment & Other Issues

Discrimination

One of the consequences of filing bankruptcy is the possible unfair treatment or prejudice against the consumer by the government sector or private organizations. That is a fact even as the law prohibits such negative actions.
Some of the unfair actions against the consumer are salary deduction, being demoted or even termination (and those are especially applicable to consumers that filed under Chapter 13).

How would the employer know of his/her employee’s bankruptcy?

In Chapter 7 cases, it is rare that the employers or anybody would be notified of the consumer’s bankruptcy, unless the creditor was able to obtain a judgment against the consumer. If the consumer’s wages are going to be garnished, the court, in a way, would force his/her employer (or the payroll department) to act as a collection agent.
In Chapter 13 however, the employer is likely to know of his/her employees bankruptcy, as the trustee is going to send him/her an Income Deduction Order. It means that there is going to be an automatic salary deduction from the consumer’s wages straight to the trustee.

Who else would know about the bankruptcy and how would they know about it?

The creditors, business institutions that obtained a copy of the consumer’s credit report (perhaps because of an application), and of course the people whom the consumer told it to. Some local low-circulation papers (that only a few read) publish some bankruptcy notices but not local radio and TV stations.
 How can some other private companies discriminate against the consumer?
Discrimination may come from a potential landlord, creditors, and employers. If they do a credit check on the consumer and found out that he/she has just recently come out of bankruptcy, the consumer might be denied rental, credit card application, loan application, get fired from a job, or turned down from a potential job.

What can the consumer do about it?

For the potential landlord, the consumer may fill out a “renter’s resume” or a rental application form. It is different from the rental agreement form. The rental application form asks the consumer to fill out the following information:

• The name, address, and telephone number of the consumer’s past and present employers, landlords, and character references.
• The consumer’s social security number, driver’s license, bank account number, and credit references.
• If he/she (landlord) can obtain a copy of the consumer’s credit report (if he/she does not have it yet.)

There is nothing much that the consumer can do about the stigma of bankruptcy but convince the landlord that he/she can make the rent and that he/she is a responsible tenant. If the consumer is really desperate he/she must ready several month’s pay (advanced), offer a cosigner, or find roommates that have better records.

For the employers, the law is clear about discrimination on the basis of the bankruptcy record alone, so the consumer, if he/she finds himself/herself a victim of it, can go to the state court or the bankruptcy court to sue.

How can some government agencies make life difficult for the consumer?

According to 11 U.S.C. 525 (b) Government agencie may not:
• Turn down or terminate the consumer’s public benefits.
• Turn down or throw the consumer out from public housing.
• Refuse to renew the consumer’s state liquour license.
• Turn down driver’s licence application.
• Deny a consumer contracts like construction projects, resesarch, loans, grants, etc.
• Withhold the consumer’s college transcript of records.
• Exclude the consumer from participation in state home mortgage finance programs or government-guaranteed student loan programs.