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Wednesday, November 2, 2011

Prohibited discriminatory treatment because of a bankruptcy filing

I got a message from a financial planner who often refers me clients. He had been speaking with someone who insisted he couldn't file a bankruptcy case because he had it (on "good" authority) that he would lose his state issued contractor's license. Sadly...another case of taking legal advice off of street corners...or worse, taking advice from an attorney poorly versed in the law.

11 U.S.C. 525 of the United States Bankruptcy Code which is entitled "Protection against discriminatory treatment" provides that a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate in respect to to employment against, a person that is or has been a debtor in bankruptcy. It provides the same protection if you are just related to someone who has filed bankruptcy....apparently a concern that the drafters of the statute wanted to address.

Another subsection of that provision also protects against discriminatory treatment in regard to student loans....any entity that grants student loans can't discriminate against someone because they've filed a bankruptcy or are related to someone that has done so. They could for some other legitimate reason, of course, but not because of a bankruptcy filing. That would go for the situation with the contractor who is worried about his license too. However...if everything else is good...then a bankruptcy won't be a detriment and the worry about losing his license (or a person worried about not getting a student loan) should not be a bona fide concern.

If you've got questions about chapter 7 or chapter 13 bankruptcy for consumers or small businesses we'd be glad to help.

www.kingsburylawoffice.com

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