Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 5–CREDITORS, THE DEBTOR, AND THE ESTATE

Sub Chapter II – Debtor's Duties and Benefits

Sec. 525. Protection against discriminatory treatment

   (a) Except as provided in the Perishable Agricultural Commodities 
Act, 1930, the Packers and Stockyards Act, 1921, and section 1 of the 
Act entitled ``An Act making appropriations for the Department of 
Agriculture for the fiscal year ending June 30, 1944, and for other 
purposes,'' approved July 12, 1943, 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 with respect to employment 
against, a person that is or has been a debtor under this title or a 
bankrupt or a debtor under the Bankruptcy Act, or another person with 
whom such bankrupt or debtor has been associated, solely because such 
bankrupt or debtor is or has been a debtor under this title or a 
bankrupt or debtor under the Bankruptcy Act, has been insolvent before 
the commencement of the case under this title, or during the case but 
before the debtor is granted or denied a discharge, or has not paid a 
debt that is dischargeable in the case under this title or that was 
discharged under the Bankruptcy Act.
    (b) 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.

    (c)(1) A governmental unit that operates a student grant or loan 
program and a person engaged in a business that includes the making of 
loans guaranteed or insured under a student loan program may not deny a 
grant, loan, loan guarantee, or loan insurance to a person that is or 
has been a debtor under this title or a bankrupt or debtor under the 
Bankruptcy Act, or another person with whom the debtor or bankrupt has 
been associated, because the debtor or bankrupt is or has been a debtor 
under this title or a bankrupt or debtor under the Bankruptcy Act, has 
been insolvent before the commencement of a case under this title or 
during the pendency of the case but before the debtor is granted or 
denied a discharge, or has not paid a debt that is dischargeable in the 
case under this title or that was discharged under the Bankruptcy Act.
    (2) In this section, ``student loan program'' means the program 
operated under part B, D, or E of title IV of the Higher Education Act 
of 1965 or a similar program operated under State or local law.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2593; Pub. L. 98-353, title III, 
Sec. 309, July 10, 1984, 98 Stat. 354; Pub. L. 103-394, title III, 
Sec. 313, title V, Sec. 501(d)(15), Oct. 22, 1994, 108 Stat. 4140, 
4145.)


                      Historical and Revision Notes

                        senate report no. 95-989

    This section is additional debtor protection. It codifies the result 
of Perez v. Campbell, 402 U.S. 637 (1971), which held that a State would 
frustrate the Congressional policy of a fresh start for a debtor if it 
were permitted to refuse to renew a drivers license because a tort 
judgment resulting from an automobile accident had been unpaid as a 
result of a discharge in bankruptcy.
    Notwithstanding any other laws, section 525 prohibits a governmental 
unit from denying, revoking, suspending, or refusing to renew a license, 
permit, charter, franchise, or other similar grant to, from conditioning 
such a grant to, from discrimination with respect to such a grant 
against, deny employment to, terminate the employment of, or 
discriminate with respect to employment against, a person that is or has 
been a debtor or that is or has been associated with a debtor. The 
prohibition extends only to discrimination or other action based solely 
on the basis of the bankruptcy, on the basis of insolvency before or 
during bankruptcy prior to a determination of discharge, or on the basis 
of nonpayment of a debt discharged in the bankruptcy case (the Perez 
situation). It does not prohibit consideration of other factors, such as 
future financial responsibility or ability, and does not prohibit 
imposition of requirements such as net capital rules, if applied 
nondiscriminatorily.
    In addition, the section is not exhaustive. The enumeration of 
various forms of discrimination against former bankrupts is not intended 
to permit other forms of discrimination. The courts have been developing 
the Perez rule. This section permits further development to prohibit 
actions by governmental or quasi-governmental organizations that perform 
licensing functions, such as a State bar association or a medical 
society, or by other organizations that can seriously affect the 
debtors' livelihood or fresh start, such as exclusion from a union on 
the basis of discharge of a debt to the union's credit union.
    The effect of the section, and of further interpretations of the 
Perez rule, is to strengthen the anti-reaffirmation policy found in 
section 524(b). Discrimination based solely on nonpayment could 
encourage reaffirmations, contrary to the expressed policy.
    The section is not so broad as a comparable section proposed by the 
Bankruptcy Commission, S. 236, 94th Cong., 1st Sess. Sec. 4-508 (1975), 
which would have extended the prohibition to any discrimination, even by 
private parties. Nevertheless, it is not limiting either, as noted. The 
courts will continue to mark the contours of the anti-discrimination 
provision in pursuit of sound bankruptcy policy.

                       References in Text

    The Perishable Agricultural Commodities Act, 1930, referred to in 
subsec. (a), is act June 10, 1930, ch. 436, 46 Stat. 531, as amended, 
which is classified generally to chapter 20A (Sec. 499a et seq.) of 
Title 7, Agriculture. For complete classification of this Act to the 
Code, see section 499a(a) of Title 7 and Tables.
    The Packers and Stockyards Act, 1921, referred to in subsec. (a), is 
act Aug. 15, 1921, ch. 64, 42 Stat. 159, as amended, which is classified 
generally to chapter 9 (Sec. 181 et seq.) of Title 7. For complete 
classification of this Act to the Code, see section 181 of Title 7 and 
Tables.
    Section 1 of the Act entitled ``An Act making appropriations for the 
Department of Agriculture for the fiscal year ending June 30, 1944, and 
for other purposes,'' approved July 12, 1943, referred to in subsec. 
(a), is classified to section 204 of Title 7.
    The Bankruptcy Act, referred to in text, is act July 1, 1898, ch. 
541, 30 Stat. 544, as amended, which was classified generally to former 
Title 11.
    The Higher Education Act of 1965, referred to in subsec. (c)(2), is 
Pub. L. 89-329, Nov. 8, 1965, 79 Stat. 1219, as amended. Parts B, D, and 
E of title IV of the Act are classified generally to parts B (Sec. 1071 
et seq.), C (Sec. 1087a et seq.), and D (Sec. 1087aa et seq.), 
respectively, of subchapter IV of chapter 28 of Title 20, Education. For 
complete classification of this Act to the Code, see Short Title note 
set out under section 1001 of Title 20 and Tables.


                               Amendments

    1994--Subsec. (a). Pub. L. 103-394, Sec. 501(d)(15), struck out ``(7 
U.S.C. 499a-499s)'' after ``Act, 1930'', ``(7 U.S.C. 181-229)'' after 
``Act, 1921'', and ``(57 Stat. 422; 7 U.S.C. 204)'' after ``July 12, 
1943''.
    Subsec. (c). Pub. L. 103-394, Sec. 313, added subsec. (c).
    1984--Pub. L. 98-353 designated existing provisions as subsec. (a), 
inserted ``the'' before ``Perishable'', and added subsec. (b).


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 106 of this title.

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