Does Bankruptcy Affect Getting a Job? Employment Discrimination

Bankruptcy and Employment

Section 525 of the Bankruptcy Code provides protections against employment discrimination:

• Government employers (525(a)): Cannot deny employment, terminate, or discriminate against you solely because of bankruptcy. This protection is clear and covers hiring.
• Private employers (525(b)): Cannot terminate existing employees solely because of bankruptcy. However, the majority of courts hold that 525(b) does NOT prohibit private employers from refusing to HIRE someone based on bankruptcy. This is a significant gap.
• Security clearances: Bankruptcy alone should not cause you to lose a security clearance. In fact, eliminating debt through bankruptcy can improve your clearance profile by removing the financial pressure that creates security risks.
• Background checks: Employers may see bankruptcy on credit checks but are prohibited from using it as the sole basis for adverse action (for government jobs) or termination (for private jobs).