How the Bankruptcy Code Protects Employees
The Bankruptcy Code protects employees from losing their job solely on the basis that they filed for bankruptcy protection. Section 525 of the Bankruptcy Code protects a person that is, or has been, a debtor under the Bankruptcy Act, or another person with whom such debtor was associated.
Protection In Government & Private Jobs
Except in limited circumstances, this section prohibits a government unit from denying, suspending, or revoking a license, permit, or other similar grant solely because a person has filed for bankruptcy or discharged a debt in bankruptcy.
Similarly, a private employer may not terminate the employment of an employee solely on the basis that an individual who is or has filed for bankruptcy protection. And it is not just firing that will give raise to a cause of action under section 525. The Code is also violated when the employee's job duties are affected by the employer's actions: The employee cannot be demoted because he or she filed bankruptcy.
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