The Bankruptcy Code expressly prohibits your employer from discriminating against you for filing for bankruptcy protection. The Code has two separate provisions, one dealing with public employers (that is, the government), and the other with private employers. Both Code sections make it illegal for any employer, public or private, to fire you or take any negative employment action toward you (like a cut in pay, demotion, or suspension) simply because you are in bankruptcy.
11 U.S.C. 525(b) is the Bankruptcy Code that prohibits private employer discrimination against debtors:
No 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, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt –
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
In most cases, employers are supportive of the decision to file bankruptcy because employees stop receiving creditor calls at work, and are less stressed out about finances in general. Sometimes, however, an employer will attempt to create a justification to terminate your employment on other grounds. If there are no other performance factors involved in the employer’s decision, then it may be obvious that the bankruptcy is the real reason you are being disciplined, and you may be able to sue your employer for discrimination under the Bankruptcy Code.
The very best way way to protect your job security when filing bankruptcy is not to allow the bankruptcy to interfere with your performance on the job. If you are a valuable employee, the company will want to keep you.