11 U.S.C. § 525

Protection against discriminatory treatment

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(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 student 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 any program operated under 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, § 309, July 10, 1984, 98 Stat. 354; Pub. L. 103–394, title III, § 313, title V, § 501(d)(15), Oct. 22, 1994, 108 Stat. 4140, 4145; Pub. L. 109–8, title XII, § 1211, Apr. 20, 2005, 119 Stat. 194; Pub. L. 116–260, div. FF, title X, § 1001(c), Dec. 27, 2020, 134 Stat. 3217.)Historical and Revision Notessenate 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. § 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.

Editorial NotesReferences in Text

The Perishable Agricultural Commodities Act, 1930, referred to in subsec. (a), is act June 10, 1930, ch. 436, 46 Stat. 531, which is classified generally to chapter 20A (§ 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, which is classified generally to chapter 9 (§ 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, 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. Title IV of the Act is classified generally to subchapter IV (§ 1070 et seq.) 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

2020—Subsec. (d). Pub. L. 116–260, § 1001(c)(2), struck out subsec. (d) which read as follows: “A person may not be denied relief under sections 4022 through 4024 of the CARES Act (15 U.S.C. 9056, 9057, 9058) because the person is or has been a debtor under this title.”

Pub. L. 116–260, § 1001(c)(1), added subsec. (d).

2005—Subsec. (c)(1). Pub. L. 109–8, § 1211(1), inserted “student” before “grant, loan,”.

Subsec. (c)(2). Pub. L. 109–8, § 1211(2), substituted “any program operated under” for “the program operated under part B, D, or E of”.

1994—Subsec. (a). Pub. L. 103–394, § 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, § 313, added subsec. (c).

1984—Pub. L. 98–353 designated existing provisions as subsec. (a), inserted “the” before “Perishable”, and added subsec. (b).

Statutory Notes and Related SubsidiariesEffective Date of 2020 Amendment

Pub. L. 116–260, div. FF, title X, § 1001(c)(2), Dec. 27, 2020, 134 Stat. 3217, provided that the amendment made by section 1001(c)(2) is effective on the date that is 1 year after Dec. 27, 2020.

Effective Date of 2005 Amendment

Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title.

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.

Notes of Decisions

Cited in 507 cases (26 in the last 5 years), 1979–2026 · leading case: Fed. Commc'ns Comm'n v. Nextwave Pers. Commc'ns Inc., 537 U.S. 293 (2003).

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Fed. Commc'ns Comm'n v. Nextwave Pers. Commc'ns Inc., 537 U.S. 293 (2003). · cites it 22× “In these cases, we decide whether § 525 of the Bankruptcy Code, 11 U. S. C. § 525 , prohibits the Federal Communications Commission (FCC or Commission) from revoking licenses held by a debtor in bankruptcy upon the debtor's failure to make timely payments owed to the Commission…”

Taylor Ayes William P. Cutshall Frank A. Ribar Edward C. Smith James F. Martin William C. Terrio v. U.S. Dep't of Vets. Affairs, 473 F.3d 104 (4th Cir. 2006). · cites it 10× “The complaint alleged that the VA violated 11 U.S.C.A. § 525 (West 2004 & Supp.2006), the anti-discrimination provision of the Bankruptcy Code, by refusing to fully restore veteran home-loan guaranty entitlements to Appellants solely because of their previous discharges in…”

Bostock v. Clayton Cnty., 140 S. Ct. 1731 (2020). · cites it 2× “11 U. S. C. §525 ; 16 U. S. C. §511 . Or it could have written “primarily because of ” to indicate that the prohibited factor had to be the main cause of the defendant’s challenged em- ployment decision.”

Myers v. Toojay's Mgmt. Corp., 640 F.3d 1278 (11th Cir. 2011). · cites it 9× “11 U.S.C. § 525 . The first subsection of that section applies to government employers and provides that they may not “deny employment to, terminate the employment of, or discriminate with respect to employment against” a person on that ground.”

In Re Hopkins, 66 B.R. 828 (Bankr. W.D. Ark. 1986). · cites it 17× “Green), President of the Bank, for contempt for violation of 11 U.S.C. § 525 , the debtor discrimination statute.”

Taylor v. United States, Dep't of Educ. (In Re Taylor), 263 B.R. 139 (N.D. Ala. 2001). · cites it 16× “1 The case is before this court on appeal on the following issues: 1) Whether 11 U.S.C. § 525 (c) implicitly voids a lender’s right under 11 U.”

Springfield Hosp., Inc., Springfield Med. Care Sys., Inc. v. Guzman, 28 F.4th 403 (2d Cir. 2022). · cites it 4× “a license, permit, charter, franchise, or other similar grant” to a debtor in bankruptcy solely because of that status, 11 U.S.C. § 525 (a); and (2) the SBA is not immune from injunctive relief under the Small Business Act, 15 U.”

Lenore Albert-Sheridan v. State Bar of California, 960 F.3d 1188 (9th Cir. 2020). · cites it 5× “The panel affirmed as to the dismissal of the debtor’s claim that by failing to reinstate her law license, the State Bar violated 11 U.S.C. § 525 (a), which prohibits a government unit from denying, revoking, suspending, or refusing to renew a debtor’s license solely because the…”

Elsinore Shore Assocs. v. New Jersey Div. of Alcoholic Beverage Control (In Re Elsinore Shore Assocs.), 66 B.R. 708 (Bankr. D.N.J. 1986). · cites it 25× “4 (1984) to it penalizes it for complying with federal bankruptcy law, and constitutes discriminatory treatment from which it is entitled to protection pursuant to 11 U.S.C. § 525 . Additionally, the debtor claims that imposition of the regulation interferes with the debtor’s…”

Elter v. Great Lakes Higher Educ. Corp. (In Re Elter), 95 B.R. 618 (Bankr. E.D. Wis. 1989). · cites it 24× “The threshold question is whether 11 U.S.C. § 525 (a) applies to the issuance of a guaranteed student loan after discharge of another student loan.”

Morrow v. Torrance Bank (In Re Morrow), 189 B.R. 793 (Bankr. C.D. Cal. 1995). · cites it 15× “Notably, in his “Memorandum of Points and Authorities in Support of Order Enforcing Cease and Desist Order [Financial Code § 8200(f) and (g) ]”, the Commissioner responds to Morrow’s argument based on 11 U.S.C. § 525 (a) by arguing its inapplicability on the grounds that neither…”

Elsinore Shore Assocs. v. Casino Control Comm'n (In Re Elsinore Shore Assocs.), 66 B.R. 723 (Bankr. D.N.J. 1986). · cites it 21× “The relief sought by the adversary complaint is: (1) a declaration that the enforcement by the Commission of the license condition, requiring ESA to pay prepetition license fees and taxes, constitutes discriminatory treatment under 11 U.S.C. § 525 ; (2) a declaration that the…”

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— 11 U.S.C. § 525(a) — 5 cases

Springfield Hosp., Inc., Springfield Med. Care Sys., Inc. v. Guzman, 28 F.4th 403 (2d Cir. 2022). “a license, permit, charter, franchise, or other similar grant” to a debtor in bankruptcy solely because of that status, 11 U.S.C. § 525 (a); and (2) the SBA is not immune from injunctive relief under the Small Business Act, 15 U.”

Hemphill v. Dayton, 2011 Ohio 1613 (Ohio Ct. App. 2011).

Roussin v. Johnson (In Re Roussin), 95 B.R. 270 (Bankr. D.N.H. 1988).

Bentley v. Glickman, 234 B.R. 12 (N.D.N.Y. 1999).

Stoltz v. Brattleboro Hous. Auth., 315 F.3d 80 (2d Cir. 2002).

— 11 U.S.C. § 525(b) — 1 case

Vaughn-williams v. First Com. Bank (D.N.J. 2020).

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