Filing Bankruptcy When You Work for a Bank
What do you do if you need to file bankruptcy but you work for Bank of America or Chase, Wells Fargo, or any bank for that matter? Even worse, what if you owe your employer money? This question comes up rather often. I have represented a number of bank employees, everyone from tellers to loan officers. These employees are worried about adverse employment actions being taken against them based on filing a bankruptcy. It is also not so uncommon for me to represent employees of the major credit card companies–e.g. American Express, VISA, MasterCard, MBNA, etc.
So if you work for a bank or a credit card company, can you file bankruptcy?
The answer is “yes.”
The Bankruptcy Code provides protection for employees from discrimination based on them filing a bankruptcy. Section 11 U.S.C. 525(a) of the Bankruptcy Code defines how government employers may act. That section states, in relevant part, that a “governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title….” 11 U.S.C. § 525(a). Section 525(a) prohibits both discrimination in hiring and discrimination with respect to existing employment. Thus, not only would it be unlawful for a government employer not to hire someone based on a bankruptcy filing, it would be unlawful for a government employer to fire or take any adverse employment action based on an employee’s bankruptcy filing.
That brings us to the banks and credit card companies who are private employers. Section 525(b) is a little weaker in its protections, providing only that private employers cannot discriminate with respect to existing employees. There is no prohibition on discrimination during hiring. That means a bankruptcy filing may prevent you from being hired at Bank of America, Chase, Wells Fargo, or any other bank or credit card company. That same bankruptcy filing, however, cannot be grounds for any adverse employment action if you are already working for one of these private employers. Section 525(b) provides that “[n]o 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 or bankrupt…” filed for bankruptcy protection. See 11 U.S.C. § 525(b). In a recent 3rd Circuit opinion, Rea v. Federated Investors, a Circuit Court held that Congress made its intent clear by the plain language of the statute. Government employers cannot discriminate in hiring but private employers may choose not to hire someone because they have filed for bankruptcy protection. In Rea, the appellant Dean Rea brought suit against Federated Investors after he had interview for a job through a placement agency. He was later informed that he was not hired because of a prior bankruptcy filing. Rea sued under Section 525(b) claiming that the statute should be read broadly to prohibit private employers from discriminating in hiring. Both the District Court and Appellate Court disagreed, holding that only government employers were prohibited by Section 525(a) from discriminating in hiring.
Thus, while neither the government nor any bank or credit card company could lawfully discriminate with respect to employment because an employee has filed bankruptcy, a private employer may refuse to hire someone based on a prior bankruptcy filing. Based on my experience, banks and credit card companies respect the law and do not take adverse employment actions based on an employee’s bankruptcy filing–even when the employee owes a debt to the employer. There is never any guarantee that an employer will not act irrationally. The Bankruptcy Code, however, provides a remedy in the form of a cause of action for wrongful termination in the event a private or public employer does not respect the law.