Post-Bankruptcy Discrimination: Is It Legal?

Find out if employers, landlords, government entities, and others can discriminate against you because you filed for bankruptcy.

If you file for bankruptcy, can federal agencies, private businesses, landlords, employers, or other entities discriminate against you solely because of your bankruptcy filing? The answer depends on whether the entity is part of the government or private. 

Federal, state, and local governmental units can’t legally discriminate against you because you filed for bankruptcy. However, the rules are more lax when it comes to private businesses and entities. 

(To learn about discrimination in your job, see Will Bankruptcy Affect My Job or Future Employment?)

No Discrimination by Government Agencies

Governmental units may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant on the basis of your bankruptcy. Judges interpreting this law have ruled that the government cannot:

  • deny or terminate public benefits
  • deny or evict you from public housing
  • deny or refuse to renew your state liquor license
  • exclude you from participating in a state home mortgage finance program
  • withhold your college transcript
  • deny you a driver’s license
  • deny you a contract, such as a contract for a construction project, or
  • exclude you from participating in a government-guaranteed student loan program.

In general, once any government-related debt has been discharged, all acts against you that arise out of that debt must also end. If, for example, you lost your driver’s license because you didn’t pay a civil court judgment that resulted from a car accident, you must be granted a license once the debt is discharged. If the debt isn’t discharged, however, you can still be denied your license until you pay up.

Discrimination by Private Entities

Prohibitions against private discrimination aren’t nearly as broad as prohibitions against government discrimination. Private employers may not fire you or punish you because you filed for bankruptcy, although they can refuse to hire you. (To get details on these rules, see Will Bankruptcy Affect My Job or Future Employment?) Other forms of discrimination in the private sector, however, such as denying you rental housing, a surety bond, or withholding a college transcript, are legal.

The best way to confront this type of discrimination is to build a solid credit history after bankruptcy. You can find sound strategies for getting back on your financial feet by visiting our area on Credit Repair, or getting Credit Repair, by Margaret Reiter and Robin Leonard (Nolo).

If a potential landlord does a credit check, sees your bankruptcy, and refuses to rent to you, there’s not much you can do except try to show that you’ll pay your rent and be a responsible tenant. You probably will need to go apartment hunting with a “renter’s résumé” that shows you in the best possible light. Be ready to offer a cosigner, find roommates, offer to pay more rent, or even pay several months’ rent up front in cash. (For more tips on finding a rental, see Nolo's Renting a House or Apartment topic area.) 

(To learn about other things you should consider before you file for bankruptcy, see the articles and Q&As in Should I File for Bankruptcy?)

 This is an excerpt from Nolo's The New Bankruptcy: Will It Work for You?, by Stephen Elias. 

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