Employees who lose their jobs often file for bankruptcy when they find themselves in financial trouble. Sometimes, they represent themselves in bankruptcy court and may not understand that they must list any potential litigation claim as an asset. They don’t know that a big jury award would be money available to satisfy their creditors.
Until recently, federal courts have dismissed even obviously valid employment discrimination lawsuits when employees failed to disclose such claims in their bankruptcy paperwork. That was a huge windfall for employers. That may no longer be true, if this recent case is any indication.
Recent case: Kathleen sued her employer for sex discrimination, alleging that it limited her to part-time hours solely because she is a woman. Around the same time, she also filed for bankruptcy when she wasn’t able to pay her bills. She never mentioned the discrimination claim in her bankruptcy filing.
Then she hired an attorney. He discovered she hadn’t told the bankruptcy court about her discrimination claim and asked the bankruptcy court to reopen the case so she could list it. The court agreed to do so.
Kathleen’s employer then asked the judge handling the discrimination case to dismiss it because she hadn’t mentioned the claim in her original bankruptcy paperwork. The court denied the request and said it wouldn’t be fair for the employer to benefit from her innocent mistake. (Quin v. Department of Education, No. 10-16000, 9th Cir., 2013)