William G. Schwab and Associates
811 Blakeslee Blvd. Dr. East (PA Route 443) PO Box 56 Lehighton, PA 18235
Tel 610-377-5200 Fax 610-377-5209
NEWSLETTER
Bankruptcy July 22, 2014
 
Personal Injury
Bankruptcy
Business
Criminal Law
Elder Law
Estate Planning/Probate
Real Estate
 

Bankruptcy Proceedings Cannot Claim Certain Retirement Interests

In 1992, the United States Supreme Court resolved a long-standing conflict in the federal courts regarding whether a debtor's retirement ...(more)

 

Bankruptcy and Stopping Foreclosures

Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), directly upon filing for ...(more)

 

Application of the Absolute Priority Rule to Confirm a Chapter 11 Plan

In a Chapter 11 bankruptcy case for business reorganization, a bankruptcy court must only confirm a debtor's business reorganization plan ...(more)

 

Prohibiting Abuse by Credit Repair Clinics Under the CROA

Credit repair clinics generally promise consumers that they will permanently remove negative information from credit reports, for a fee. A ...(more)

 

Bankruptcy Law In The News

Former NFL Quarterback Vince Young Files For Bankruptcy

Central California Diocese Files for Bankruptcy

Duke Energy settles suit over Crescent bankruptcy

Detroit water department mediation to continue next week

Detroit bankruptcy plan threatens survivor benefits of families of fallen cops, firefighters

Prohibiting Employers From Discriminating Against Bankrupt Employees


Section 525 of the U.S. Bankruptcy Code prohibits employers from firing or otherwise discriminating against a person who "is or has been a debtor" in bankruptcy.  This anti-discrimination provision of the Code is intended to further the goal of allowing debtors who have formally filed for bankruptcy to make a "fresh start."
 
Scope of Protection
The prohibition against employment discrimination based on bankruptcy applies to both government employers and private employers, and is meant to protect the following categories of people:
  • An individual who is or has been a debtor
  • An individual who has been insolvent prior to the commencement of a bankruptcy case, or during a case before grant or denial of a discharge
  • An individual who has not paid a debt that is dischargeable in a bankruptcy case, or that has been discharged under the Bankruptcy Act
Intent to File Does Not Warrant Debtor Protection
The U.S. Court of Appeals for the Ninth Circuit has set forth a bright line rule for determining exactly which employees are protected by Section 525.  Specifically, the court held that an employer who fires a debtor employee after learning of the debtor employee's intent to file bankruptcy does not violate the Code.  Rather, protection only extends to employees who have already filed for bankruptcy.
 
In the aforementioned case, the debtor was hospitalized and incurred substantial medical expenses at a hospital where he was also employed.  The debtor was ultimately unable to pay off his debt and informed the hospital that he was planning to file for bankruptcy.  Subsequently, the hospital fired the debtor.  The court ruled that the debtor did not have a valid action against the hospital for unlawful termination under Section 525, because the Code's protection extends only to an individual who "is or has been a debtor."  In this case, however, the hospital fired the debtor before the debtor filed for bankruptcy.  As such, Section 525 did not apply. 

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