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Another Court Rules that an Employer Can Refuse to Hire Based on a Bankruptcy Filing

Posted on May 23, 2011

New Jerseyans have already found out that private employers can refuse to hire you because you filed bankruptcy, due to the federal Third Circuit court's decision in Rea v. Federated Investors, 627 F.3d 937 (3d Cir. 2010). This was actually the first ruling on this issue, and was followed by the Fifth Circuit in In re Burnett, in March of this year. Now, the 11th Circuit, which includes North Carolina where the case originated, has supported this growing trend in Myers v. TooJay's Management Corp., decided just this past Tuesday, May 17, 2011.

In that case, the debtor, while employed by Starbucks, interviewed with TooJay's and went through a two day on-the-job evaluation. Two days after his evaluation period, he gave notice to Starbucks, only to be told by TooJay's that he would not get the job because he had filed bankruptcy. Although he was able to go back to his old job, it was at reduced hours. The court, in making its ruling, noted that it was following the precedent of the other circuits in the Rea and Burnett cases.

The importance of this court ruling is that it shows a trend in the law as it spreads throughout the federal circuit courts of appeal. It amounts to a clear warning to debtors that only their current job is secure should they file bankruptcy. Any new employer (unless it is public employment, which cannot discriminate on this basis) can just "round file" your resume upon doing a credit check. Although this is very discouraging for people facing bankruptcy because they have already lost their jobs, it is also a warning for those looking to change jobs. You might want to get that new position and be secure in it before you file.

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