When considering bankruptcy, the main issue on many people's minds is whether it will be possible to rebuild lives after filing. Bankruptcy usually means families need to wait to purchase a home, buy a car with a loan, or apply for new credit cards.
However, if you're unemployed at the time you file for bankruptcy, you might worry that applying for jobs with a bankruptcy on your record could make landing a new job difficult or even impossible.
Public Records and Bankruptcies
Records of bankruptcies are available through the Public Access to Court Electronic Records system, which is a national index of U.S. District bankruptcies and bankruptcies in the appellate courts.
If you're currently employed, you don't need to worry that filing for bankruptcy would give your employer reason to terminate your employment. The law offers protection to individuals who have filed for bankruptcy by making it illegal to fire someone because of a bankruptcy filing, insolvency, or unpaid debts.
According to legal portal All Law, the law even protects the spouses of individuals who have filed for bankruptcy. If your husband or wife files for bankruptcy, his or her filing cannot be a cause for an employer to fire you.
In addition to making it illegal to fire someone because of bankruptcy, the law also protects debtors by making it illegal to deny someone a promotion or raise because of a bankruptcy filing. Also, employers cannot demote you or reduce your salary because you filed for bankruptcy.
Will Bankruptcy and Make a New Job Search Impossible?
The law isn't as comprehensive when it comes to protecting people searching for jobs. There are some laws that protect job seekers; however, state and private employers are treated differently. While a government employer cannot refuse to hire someone solely because of a bankruptcy filing, private employers may refuse to hire you if you've filed for bankruptcy.
Unfortunately, many employers have started to run credit checks alongside background checks when hiring new employees. A damaging credit report could have negative consequences on your job search if a future employer saw a recent bankruptcy filing.
Although credit reports aren't even accurate 100% of the time, many employers are still using them to help decide whether an applicant is worth hiring or interviewing. A statistic reported by ABC News suggests that about 60% of companies performed credit checks on at least some of their current and future employees.
ABC News suggests the following as to why some employers want to know about an applicant's credit history:
The reason many employers like to see credit reports is straightforward: Many believe that someone drowning in debt will be more focused on his or her personal financial issues than work, or that a long history of unpaid bills, foreclosures and delinquencies could be indicative of a lack of responsibility and good decision making skills that could ultimately hamper job performance. And if any of those negative elements exist within your credit report, they are going to want an explanation.
How to Deal with Bankruptcy and a Job Search
If you're unemployed at the time you file for bankruptcy, you'll need to prepare yourself for some hurdles that wouldn't exist if your credit report were free of blemishes. Companies are increasingly concerned about the financial welfare of their employees and how issues like bankruptcy might impact an employee's job performance.
Before applying for jobs, you'll want to check your credit whether you've filed for bankruptcy or not. A filing won't torpedo your chances of getting a job, but it's important to make sure that your credit report looks as healthy as possible despite a bankruptcy filing.
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