Evidence demonstrated that employer had not fired husband and wife "solely because" they had filed bankruptcy.
Extensive evaluation of evidence demonstrating that defendants fired plaintiff solely because she filed a bankruptcy. Resulting violation of section 525(b) of the Bankruptcy Code entitled plaintiff to damages for violation of her civil rights (using 42 U.S.C. 1983).
Section 525(b) of the Bankruptcy Code does not prohibit private employer from refusing to hire a person because of that person's bankruptcy or failure to pay a debt dischargeable in bankruptcy (and identifying other courts reaching the same conclusion).
FCC violated section 525(a) of the Bankruptcy Code by terminating an FCC license "solely because" of a licensee's filing of a bankruptcy petition and failure to pay a debt dischargeable in bankruptcy.
Protection against certain types of discriminatory treatment.
Section 525 of the Bankruptcy Code prohibits certain types of discrimination against any debtor who has filed a Chapter 7 or Chapter 13 proceeding. The prohibitions of discrimination falls into three general categories. Two of these categories prohibit discrimination by governmental units, and it is thus important to know the definition of a "governmental unit." A governmental unit means any of the following: (a) the United States, a state (e.g. California), a commonwealth (e.g. Northern Mariana Islands), a district, a territory (e.g. the U.S. Virgin Islands), a municipality (e.g. Chicago or Cook County), a foreign state (e.g. Germany); (b) a department, agency, or other instrumentality (e.g. a local sheriff) of any of the just mentioned entities; (c) other foreign or domestic government.
The prohibitions also protect any person with whom the debtor "has been associated" and also protect any person who was a debtor under the Bankruptcy Act, which was replaced by the Bankruptcy Code in October 1979. The protection of a person with whom the debtor has been associated is not discussed here.
A. Types of prohibited discrimination
1. Discrimination by governmental units generally (section 525(a) of the Bankruptcy Code)
A governmental unit may not deny, revoke, suspend, or refuse to renew a license "solely because" a person has been a debtor under the Bankruptcy Code or has failed to pay a debt that is dischargeable under the Bankruptcy Code. For example, a state contractor's licensing board could not deny a person a contractor's license or a state board of cosmetology could not revoke a person's license as a hair dresser solely because that person was a debtor under the Bankruptcy Code.
Similarly, a governmental unit may not deny, revoke, suspend, or refuse to renew any permit, charter, franchise, or similar grant (or condition any such grant) "solely because" a person has been a debtor under the Bankruptcy Code or has failed to pay a debt that is dischargeable under the Bankruptcy Code. For example, a state charter school commission could not deny a person a charter to operate a charter school solely because that person was a debtor under the Bankruptcy Code.
Finally, a governmental unit may not deny employment to a person, terminate the employment of a person, or otherwise discriminate with respect to employment of a person (such as by reducing hours or job responsibilities) "solely because" that person has been a debtor under the Bankruptcy Code or has failed to pay a debt that is dischargeable under the Bankruptcy Code. For example, a city could not refuse to hire a police officer solely because the person applying to be a police officer has been a debtor under the Bankruptcy Code.
The meaning and importance of the words "solely because" is discussed below.
2. Discrimination by private employers (section 525(b) of the Bankruptcy Code)
Private employers also may not terminate the employment or discriminate with respect to employment of a person "solely because" that person has been a debtor under the Bankruptcy Code or has failed to pay a debt that is dischargeable under the Bankruptcy Code. Note, however, that this does not prohibit a private employer from refusing to hire such a debtor.
3. Discrimination relating to student loans, student grants, or student loan guarantees (section 525(c) of the Bankruptcy Code)
The federal government and some states offer student loan programs for students seeking post-secondary education. These programs may include loans made directly by the governmental unit or may include guarantees that insure repayment of loans made by private lenders if the student fails to repay the loan. These programs may also include outright grants (i.e. funds that the student need not repay). If the student loan program from which a present or prospective student seeks a loan or grant is operated under Title IV of the Higher Education Act of 1965 or is a similar program offered under state or local law, then a governmental unit that operates such a program may not deny that student (or any other person "associated" with that student) a loan, grant, loan guarantee, or loan insurance because that student has been a debtor under the Bankruptcy Code or has failed to pay a debt that is dischargeable under the Bankruptcy Code. This prohibition on discrimination also applies to any private lender whose business includes the making of loans guaranteed or insured under the type of student loan program described.
B. The meaning of "solely because"
Sections 525(a) and 525(b), but not section 525(c), refer to discrimination "solely because" a debtor has been a debtor under the Bankruptcy Code or failed to pay a debt dischargeable under the Bankruptcy Code. The Supreme Court of the United States has interpreted the language "solely because" as prohibiting discrimination if the debtor's bankruptcy or failure to pay a debt dischargeable under the Bankruptcy Code is "alone . . . the proximate cause . . . " of the discrimination. In other words, the bankruptcy or failure to pay a debt must be "the act or event that triggers [a discriminatory decision no matter what] the ultimate motive in pulling the trigger may be."
C. Does an individual injured by prohibited discrimination have a legal remedy (a private right of action)?
Section 525 of the Bankruptcy Code does not include any language giving an individual the right to sue for discrimination that is prohibited by the section. Accordingly, most courts have concluded that section 525 does not grant any such right. They have also concluded that there no such right exists under section 105 of the Bankruptcy Code, a section that gives a bankruptcy court power to issue any judgment necessary or appropriate to carry out provisions of the Bankruptcy Code. But, under 42 U.S.C. 1982 (a part of federal civil rights legislation), a debtor who has filed bankruptcy or failed to pay a debt dischargeable in bankruptcy may seek a remedy, including damages, against any person who deprives them of rights secured to them by any law of the United States (including rights secured by section 525 of the Bankruptcy Code).
D. Refusal to extend credit
Any person, including any governmental unit, may discriminate in the extension of credit between persons who have filed bankruptcy and those who have not filed bankruptcy (except as noted above with respect to some student loans, student loan guarantees, or student grants).
A thorough presentation and explanation of statistical information about the widespread inability of a large number of consumer Chapter 13 debtors to successfully complete a Chapter 13 repayment plan.
Restrictions of homestead exemption
Homestead exemptions under the laws of each state protect a debtor's interest in a principal residence, but the value of the interest protected varies widely among states. Wyoming, for example, protects $20,000 in value for each person who jointly owns and occupies the same residence. Neighboring Montana protects $250,000 in value ($500,000 for married couples). Texas protects the entire value of an urban homestead of not more than ten acres and the entire value of a rural homestead of not more 100 acres for a single person and 200 acres for a family. The amount of value protected by the homestead exemptions of most states falls somewhere between the Wyoming and Texas extremes.
A debtor may be tempted to move from one state to another to take advantage of a more generous homestead exemption in the destination state. The Bankruptcy Code reduces the incentive to do so in two ways. First, as discussed in the separate subtopic entitled "Applicable State Law," if the debtor files bankruptcy within a specified amount of time after moving, the exemptions available to the debtor, including the homestead exemption, will be determined by the exemption law of the state from which the debtor has moved (the originating state) rather than by the exemption law of the destination state. Second, even if the state exemption law of the destination state applies to the debtor filing bankruptcy, the debtor may claim not more than $160,375 in value in a homestead (doubled for married couples), even if the state homestead exemption is greater (as in Texas, for example), if the debtor acquired an interest in the homestead within the 1215-day period preceding the filing of the bankruptcy petition. The meaning of "acquiring an interest" (does it include home additions or improvements, repairs, market generated appreciation, additional equity generated by mortgage payments?) is beyond the scope of this explanation. The second restriction does not apply to family farmers and does not apply to intrastate moves from one principal residence to another. The second of these two limits on the homestead exemption does not apply if the debtor claims a homestead exemption under the federal bankruptcy exemptions or if the debtor's interest in real property is a tenancy by the entirety or joint tenancy that is exempt from process under state law.
The Bankruptcy Code also limits homestead exemptions in two other general situations. These limitations do not apply if the debtor claims a homestead exemption under the federal bankruptcy exemptions or if the debtor's interest in real property is a tenancy by the entirety or joint tenancy that is exempt from process under state law. .
First, the debtor may claim not more than $160,375 in value in a homestead (doubled for married couples), even if the state homestead exemption is greater (as in Texas, for example), if the debtor has committed a felony that demonstrates that the filing of the case was an abuse of the provisions of the Bankruptcy Code or if the debtor owes a debt arising from any one of several types of activity: (a) violation of federal or state securities laws or regulations, (b) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of certain registered securities, (c) racketeering, and (d) any criminal act or intentional tort or willful or reckless misconduct that caused serious personal injury or death to another person within the five years preceding the filing of the petition. This restriction does not apply to the extent that the value of the interest in the homestead is reasonably necessary for the support of the debtor and any dependent of the debtor.
Second, the value of any homestead exemption claimed is to be reduced to the extent that the value is attributable to any portion of property that the debtor disposed of in the ten-year period preceding the filing of the petition to hinder, delay, or defraud a creditor if the debtor could not have exempted that portion of property had the debtor not disposed of the property.
The limits on homestead exemptions described above also apply to burial plots for the debtor or a dependent of the debtor and to a debtor's interest in a cooperative that owns property that the debtor or dependent of the debtor uses as a residence.
Proper venue for filing bankruptcy petition.