Absolutely not. Financial problems are so common that they touch almost everyone. Many people live paycheck-to-paycheck. So even a slight income disruption or a small unexpected expense is often devastating. One in four Minnesotans worry about money so much that they have PTSD-like symptoms. That figure is self-reported, so the actual number may be even higher.
In other words, if financial problems could affect your job, many of us would be out of work. That’s simply not a workable environment, so bankruptcy discrimination is illegal.
Why is Bankruptcy Discrimination Illegal in Minnesota?
Since 2005, courts and Congress have weakened many of the protections in the Fair Debt Collection Practices Act and the Bankruptcy Code. But 11 U.S.C. 525 is still standing high and dry.
Status discrimination is always illegal. You can change your appearance, but you cannot change your age or race. You can learn a new language, but you cannot change your national origin. So, the Civil Rights Act prohibits discrimination based on race, national origin, age, and other such uncontrollable factors.
Similarly, bankruptcy is a status, in most cases. While a few people file petitions due to reckless overspending, most are rooted in things like:
- Job loss,
- Medical bills, or
- Business downturn.
The debtor has little or no control over these things. Since it is illegal to discriminate based on things the person cannot control, bankruptcy discrimination is illegal.
When Do My Financial Problems Become a Job Issue?
This prohibition is not absolute. Bankruptcy discrimination is not enthroned in the Civil Rights Act. If financial problems interfere with your job performance, an employer may be able to take action. But bankruptcy helps your cause in this area. It does not hurt it.
Collection calls at work are highly disruptive. Bankruptcy’s automatic stay stops such disruptive calls. Furthermore, since bankruptcy discharges debt, it eases the aforementioned financial stress. That makes you a better and happier worker.
If financial issues do become a problem, many bosses follow an informal process. The worker often gets a verbal warning and a chance to make changes before the boss takes real adverse action. Sometimes, the boss follows a more formal process, like the one laid out in the Code of Federal Regulations. Guideline F is particularly important for people with security clearances. There’s a persistent myth that bankruptcy results in security clearance revocation. But in fact, the opposite is true if you look at the concerns and mitigating factors:
- Illegal or Immoral Conduct: Bankruptcies usually have no relation to “gambling, drug abuse, alcoholism, or other issues of security concern.” Similarly, most petitions have nothing to do with “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust.”
- History of Unmet Obligations: Such a history indicates that the person has little sense of commitment or duty. In contrast, most people file bankruptcy because of a one-time reversal that has a snowball effect.
- Uncontrollable Circumstances: If the debt problems were beyond the person’s control, there is no concern as far as the government is concerned. The list of examples (“loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation”) mirrors the above list of why people file bankruptcy.
- Effort “To Resolve” Debt: Filing a petition, especially a Chapter 13, is clear evidence that the person is making every effort to resolve debt. On the other hand, events like repossessions and foreclosures indicate that the debtor simply quit.
Not coincidentally, this part of the CFR places financial problems alongside alcoholism. In other words, financial difficulty is more of a pink flag than a red flag. It may indicate that something is amiss, but it probably is nothing.
The Poverty Prejudice in Minnesota
Despite the clear legal prohibitions against racism, many Americans are racist. In the same way, despite the strong anti-bankruptcy discrimination laws, some people still discriminate on this basis.
Winning a discrimination case in court is usually possible, but it’s also very time consuming. It is much easier to deal with the poverty prejudice upfront. Before you file bankruptcy, it’s sometimes a good idea to talk with your boss about your plans. You need not share all the details. But bankruptcy is often the classic “turning the corner” moment when it comes to financial problems. So, if you’re like poor Professor Gopnik and your financial problems are affecting your job, let your boss know that things are about to get better.
Filing bankruptcy does not affect your job, and it often has a positive effect. For a free consultation with an experienced bankruptcy attorney in Minneapolis, contact Kain & Scott. We offer a free credit repair program for our bankruptcy clients.