Fired For Filing Bankruptcy?

Anyone who has considered, or completed, bankruptcy knows the number of fears associated with the process. Many people worry that their friends, neighbors and even employers will find out. Although bankruptcy is a valuable resource that can provide financial relief, many fear there will be a stigma associated with it. Having these fears prevents many people from experiencing the benefits bankruptcy has to offer.

One Woman’s Worst Fear

A resident of Kanawha County, West Virginia is suing her former employer, Gymboree, on the grounds she was wrongfully terminated as the result of a bankruptcy filing. As the manager of the store, the woman felt she held an important position in the company, one she says was stripped of her only seven days after filing a bankruptcy petition. The woman claims the store had no real basis or grounds for the firing and is pursuing damages in court.

Does she even have a case?

Unfortunately, filing for bankruptcy is a matter of public record. However, that does mean that anyone will, or has to, find out about your financial situation. Notification of a bankruptcy filing is not published in the paper, or pasted to a billboard; it is simply published in court and county records. In fact, there are laws that prohibit certain discriminatory actions against anyone who has filed for bankruptcy, such as being fired from a job.

Bankruptcy Laws Protect Filers

Federal law prohibits employers from terminating employment or discriminating against an employee solely on the basis of a bankruptcy filing. Bankruptcy Code 11 U.S.C. section 535(b) states:

“No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title … solely because such debtor … is or has been a debtor under this title….”

The placement of such laws is intended to protect those who seek protection through bankruptcy. However, it is important to note that this law only extends to the basis of discriminating against someone for having filed bankruptcy; and does not protect anyone with additional employment related problems. As for the lady in Kanawha County, West Virginia, the burden of proof is on her to demonstrate she was terminated solely for the reason of having been associated with a bankruptcy filing. More than likely, there were legitimate reasons for her termination, and the timing of the termination after her filing was a matter of coincidence.