Bankruptcy cannot be Used to Discriminate against Applicant

June 8, 2007

Employers who obtain credit information in compliance with the Fair Credit Reporting Act must be aware of the limitations on its use created by the Bankruptcy Act. Section 575 of the Bankruptcy Act protects employees and applicants from discrimination if an individual:

  • is or has been a debtor under this title or a debtor or bankrupt under the Act;
  • has been insolvent before the commencement of a case under the Act or during the case but before the grant or denial of a discharge; or
  • has not paid a debt that is dischargeable in a case under this title or that was discharged under the Act.

Courts have limited the reach of this provision by requiring that the discrimination be "solely because" of the individual’s bankruptcy participation.