The Bankruptcy Code prohibits conduct by a governmental or private employer that would discriminate against a person solely because they have filed bankruptcy, has been insolvent before the commencement of the case or has discharged a debt in bankruptcy. It is first necessary to determine whether an employment relationship does in fact exist. This generally means that you were in an employment position at the time the bankruptcy petition was filed. The prohibition does not extend to hiring or other types of decisions where the debtor was not yet an employee of the employer on the date the bankruptcy petition was filed. The definition of an employment relationship is quite broad and may include situations generally not thought to be included.
A governmental or private employer are clearly prohibited from discriminating against a debtor with regard to their employment. This prohibition extends to discrimination regarding any aspect of a debtor's employment. The debtor must prove the offense or act committed by the employer was due soley because of the debtor's bankruptcy filing, being insolvent before the commencement of the case or the non-payment of a dischargeable debt. If the employer can show that there were other reasons for its' conduct toward the employee, then there is no violation. If a debt is of the type that is nondischargeable, then any discrimination is not prohibited. A debtor can encounter problems in proving the actual motivation of the employer if the employer provides other reasons for its' actions. Even when the employer provides its' other reasons for the discrimination, the Court can still disregard those other reasons if they appear to be frivolous and deem that a violation has in fact taken place. If it is determined that a violation has taken place, then the debtor is entitled to injunctive and declaratory relief. Such relief could be in the nature of the actual reinstatement of the employment position, if the debtor had already been terminated or even the promotin of the debtor to a new position, if such promotion had been previously denied. Not only can the debtor be awarded injunctive or declaratory relief, but an award of monetary damages for lost wages is a possibility, excluding any punitive award. The Court generally will not award attorney fees either. The Bankruptcy Code gives the Court considerable leeway in fashioning remedies to allow the debtor to reap the benefits of a fresh start that the filing of bankruptcy is intended to provide. It should be pointed out that these awards are generally for actions that occur after the bankruptcy case is filed and are not property of the bankruptcy estate. This means that a debtor in a Chapter 7 Bankruptcy can keep any award since it is not property of the estate. However, since the duration of a Chapter 13 is normally for five years, any award may become property of the estate and require a payment to unsecured creditors.