Bankruptcy And Background Checks: Can You Still Serve?

Background checks are a normal part of the job application process, and they are often used to ensure that employees are who they say they are and that there is no information in their past that could cause problems for the company. A background check may include criminal records, credit reports, educational background, driving records, and more. One of the most common questions for people considering bankruptcy is whether it will show up on background checks. While bankruptcies typically show up on background checks, they are not usually necessary for every candidate an employer hires. Depending on the circumstances, a bankruptcy filing could be relatively unimportant, and in some cases, it can even work in your favor.

Background checks are most commonly done when applying for a job, credit or loan

Background checks are most commonly done when applying for a job, credit, or loan. They are used to verify the information provided by a candidate on their resume and in interviews. They are also used to ensure that the candidate is not a liability to the company. Background checks are a multi-step process and typically take between two and five business days to complete, but this can vary depending on the number of residences and jobs a candidate has had, as well as the types of screenings performed.

Employers often use background checks to obtain additional information about candidates. This includes education, employment history, criminal records, motor vehicle or license checks, and credit history. In the case of bankruptcy, this will show up on a background check report as all bankruptcy cases are filed in special federal courts and are, therefore, a matter of public record. A bankruptcy filing will also show up on a credit report, which is frequently part of a background check.

The impact of a bankruptcy filing on a background check depends on the situation and the person or business reviewing the background check. For example, a bankruptcy filing may be less important to an employer in an industry unrelated to finance. However, for employers in the financial services industry or for positions with access to company assets or sensitive financial information, a bankruptcy filing may be a more significant consideration. In these cases, an employer may pay a company to conduct a more comprehensive background check that includes an investigation of the candidate's financial history.

It is important to note that, in the United States, the Federal Trade Commission (FTC) enforces the Fair Credit Reporting Act (FCRA). This act requires employers to inform candidates in writing that financial information may be used to make decisions about employment, and candidates must give written permission for the background check to be conducted. If an employer decides not to hire a candidate based on their financial information, they must provide the candidate with a notice and a copy of the report on which the decision was based.

Bankruptcy filings are a matter of public record

Bankruptcy filings are generally only one factor when employers, landlords, or financial institutions are reviewing an application. Bankruptcy checks are not usually necessary for every candidate an employer hires. They are most often used by employers hiring for positions in the financial services industry or for positions with access to company assets or sensitive financial information. For example, if the position involves accessing cash, sensitive customer or business information, or financial accounts, the employer will need to complete the adverse action process before deciding against hiring the applicant.

If an employer decides not to hire an applicant based on background information, they must first give the applicant a notice, including a copy of the report they relied on to make the decision. A bankruptcy filing could be relatively unimportant, depending on the situation or the person or business who finds the bankruptcy filing. In fact, sometimes having filed for bankruptcy can actually work in your favour. This is because successfully discharging debt through bankruptcy can not only eliminate many debts but also provide protection from creditors and give you a fresh financial start. So, depending on the circumstances, you may be considered less of a potential risk than before you filed for bankruptcy.

Bankruptcy filings will show up on background checks to varying lengths of time, depending on the type of bankruptcy, the agency conducting the check, and whether court records are also accessed. Chapter 13 bankruptcy is removed from the report seven years from the filing date, while Chapter 7 bankruptcy can be reported for up to 10 years. Under federal law, government employers are prohibited from discriminating against someone based on their filing for bankruptcy or denying them employment. Private employers, on the other hand, can consider previous bankruptcies when making hiring decisions. However, they cannot refuse to hire or discriminate based solely on an applicant's bankruptcy history.

Bankruptcy filings are only one factor when employers review an application

Bankruptcy filings are a matter of public record, filed in special federal courts. While bankruptcy filings will likely show up on a background check, they are generally only one factor when employers review an application. Most employers do not check financial history as part of a job offer, and bankruptcy filings are not necessary for every candidate. They are most often used by employers hiring for positions in the financial services industry or for positions with access to company assets or sensitive financial information.

If an employer does run a more comprehensive check that includes a credit report, then the bankruptcy will almost certainly show up on the report. However, bankruptcies remain on credit reports for no longer than seven to ten years after filing, depending on the type of bankruptcy. After this period, the bankruptcy should no longer appear on the report.

Under federal law, employers cannot discriminate against someone based on their filing for bankruptcy or deny them employment. This means that local, state, and federal employers can't reject an applicant solely based on a past bankruptcy case. Private employers can consider previous bankruptcies when making hiring decisions, but they cannot refuse to hire based solely on bankruptcy history. If an employer decides not to hire based on background information, they must first provide a notice, including a copy of the report they relied on to make the decision.

In some cases, having filed for bankruptcy can work in your favour. Successfully discharging debt through bankruptcy can eliminate many debts and provide protection from creditors, giving you a fresh financial start. Depending on the circumstances, you may be considered less of a potential risk than before you filed for bankruptcy.

A bankruptcy filing can sometimes work in your favour

Bankruptcy filings will likely show up on a background check report, but they might not be as detrimental as you think. In fact, a bankruptcy filing can sometimes work in your favour. This is because successfully discharging debt through bankruptcy can not only eliminate many debts but also provide protection from creditors and give you a fresh financial start. Depending on the circumstances, you may be considered less of a potential risk than before you filed for bankruptcy.

Bankruptcy is a legal procedure that individuals and businesses may use to discharge, repay, or restructure debt to improve their financial situation. It is designed to help consumers obtain relief from debt they can't afford to repay while also ensuring that creditors receive some payment based on the borrower's financial situation and assets. Once you file for bankruptcy, your creditors must halt all collection attempts, including things like foreclosure, repossession, and wage garnishment.

There are different types of bankruptcies, usually referred to by their chapter in the U.S. Bankruptcy Code. The most common types of personal bankruptcies are Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves selling off some of your assets to pay off what you can and discharging the rest of your debts. Chapter 13 bankruptcy allows you to retain your assets and create a long-term repayment plan. It is important to note that certain types of debt, such as alimony, child support, student loans, and certain taxes, cannot be discharged in a Chapter 7 bankruptcy filing.

While bankruptcy can have negative consequences, such as damaging your credit score, it can also provide a path to financial recovery. It is recommended to consult with a financial counsellor or attorney to explore all options and understand the potential impact on your financial and legal situation.

Employers cannot discriminate based on bankruptcy status

While bankruptcy filings are a matter of public record, they are generally only one factor when employers are reviewing an application. A bankruptcy filing could be relatively unimportant, depending on the situation and the person or business reviewing the application. In fact, sometimes having filed for bankruptcy can actually work in your favor. This is because successfully discharging debt through bankruptcy can not only eliminate many debts but also provide protection from creditors and give you a fresh financial start. So, depending on the circumstances, you may be considered less of a potential risk than before you filed for bankruptcy.

If you are applying for a government job at the federal, state, or local level, you have protections against discrimination based on a previous bankruptcy. The employer cannot take the bankruptcy into account when deciding whether to hire you. Federal bankruptcy non-discrimination laws protect individuals from various forms of government discrimination related to bankruptcy, such as denying, suspending, canceling, revoking, or declining any licenses, franchises, or other privileges because of the bankruptcy.

In the private sector, however, there is no law prohibiting discrimination by private employers. Private employers can decline to hire someone because of a bankruptcy filing. However, private employers cannot terminate the employment of current employees or discriminate with respect to employment against individuals for declaring bankruptcy.

It may be advantageous to tell an employer about bankruptcy, especially if your employer might be ordered to make deductions from your wages for your repayment plan. Being open about your bankruptcy may convince the employer that you would be a trustworthy employee despite your past financial troubles.

Frequently asked questions