Filing for bankruptcy can have long lasting consequences, not the least of which is that it will cause damage to your creditworthiness, making it harder for you to borrow money. At times, some individuals may also find that they are being discriminated against because of a bankruptcy filing. That’s the bad news. The good news is that in many instances, this form of discrimination may be illegal.
First, local, state and federal government agencies cannot legally discriminate against you for going bankrupt. In particular the government can deny or terminate public benefits such as Medicaid or the Supplemental Nutritional Assistance Program (formerly known as food stamps). In addition, the government is barred from denying or evicting you from public housing if you file for bankruptcy.
The government also cannot deny or refuse to renew a variety of licenses, including a driver’s license, a business license or a state liquor license. Finally, the government is prohibited from denying you a contract, or excluding you from participating in a federal government-guaranteed student loan or state home mortgage finance program. Moreover, if any government-related debt, such as a civil court judgment, has been discharged, then all activities against you related to that debt must also cease.
When it comes to private businesses and other entities such as employers and landlords, however, you do not have the same protections against bankruptcy discrimination. Although private employers cannot fire or punish you because you filed for bankruptcy, they have a right not to hire you. While many employers do not run credit checks, if you do not give them permission to do so, they probably will not offer you a job. Moreover, a landlord who runs a credit check and discovers a bankruptcy may legitimately refuse to rent an apartment to you.
In short, the government cannot discriminate against you for bankruptcy, but it can make it hard for you find a job or a place to live. For these reasons, if you are considering personal bankruptcy, it is crucial to have proper legal representation. An experienced bankruptcy attorney can help explore all your options, and provide advice and counsel on how to rebuild your credit in order to overcome post-bankruptcy discrimination.