§525 Protection against discriminatory treatment

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.

note set out under section 1001 of Title 20 and Tables.

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).

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.

of 2005 AmendmentAmendment 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

, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title.

of 1994 AmendmentAmendment 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.

of 1984 AmendmentAmendment 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.