How Bankruptcy Can Affect Employment Prospects

Law360, New York (March 4, 2011, 3:34 PM EST) -- In Rea v. Federated Investors,[1] the U.S. Court of Appeals for the Third Circuit held that Section 525(b) of the U.S. Bankruptcy Code, which generally prohibits discrimination based on a person’s history of bankruptcy, does not prohibit private employers from refusing to hire persons because they previously claimed bankruptcy.

Thus, while the law proscribes terminating or otherwise discriminating against an existing employee because of a prior bankruptcy, it does not prevent employers from refusing to hire applicants who have previously claimed bankruptcy.

The plaintiff in the...
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