Why Credit Matters For Work
The employer credit check is designed to check for financial problems that could pose a problem on the job. If youre a public service employee, you might be a target for bribes. If you have significant debt, your employer might think youre more willing to accept those bribes because theyll get you out of your financial predicament.
In 2018, the acting mayor of Dallas took more than $450,000 in bribes, part of which he used to pay down debt.
Some companies also require credit checks because youre applying for a finance-related position, and they want to know their future employee hasnt defaulted on their student loans, for example. The thinking is if youve done a bad job managing your own finances, you probably cant handle running the finances of a business either.
Private Employers Denying A Job Based On Bankruptcy
Although a plain reading of 525 would seem to prevent denial of employment by private employers based on bankruptcy, the case law actually trends in the opposite direction.;The great majority of cases have held that private employers are not subject to liability under Section 525 for a denial of employment.;See Rea v. Federated Investors,;627 F.3d 937;
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Can I Get Fired From My Job If I File For Bankruptcy
For those who are currently employed: can bankruptcy cause you be fired from a job you already hold?
The short answer to this question is, no.
See the terms of 11 U.S. Code § 525, which states:
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
You may be fired for other reasons while you happen to be undergoing a bankruptcy, but the bankruptcy itself is not legal cause for job termination within private companies.
However, if you file under Chapter 13, the associated reorganization plan which generally includes garnishment toward your debts will probably become known to your employer ;.; Nonetheless, you have little to fear: you are protected by federal law.
Can You Lose Your Job For Filing Bankruptcy
Your company cant fire you, demote you, or take any kind of action against you just because of a bankruptcy. Your employer is also banned from discriminating against you because your spouse has filed. However, your employer could potentially fire or demote you if they think you behaved irresponsibly or unethically in acquiring the debt and that it is impacting your work as an employee.;
The reality is that discrimination can be difficult to prove. If your employer fires you after discovering your bankruptcy but says you were dismissed due to subpar job performance, it could be tough to show that you were wrongfully terminated.;
Will You Lose Your Job
No employer government or private may fire you because you filed for bankruptcy. Nor may an employer discriminate against you in other terms and conditions of employment; for example, by reducing your salary, demoting you, or taking away responsibilities because of your bankruptcy.
However, if there are other valid reasons for taking these actions, the fact that you filed for bankruptcy wont protect you. In other words, an employer who wants to take negative action against you can do so provided there are other valid reasons to explain the action such as tardiness, dishonesty, or incompetence. But if you are fired shortly after your bankruptcy is brought to your employers attention, you might have a case against the employer for illegal discrimination because of your bankruptcy.
Protection Is Limited When You Are Seeking New Employment
The bankruptcy laws also provide some protection for bankruptcy filers when they are being considered for new employment but it does not apply to all employers.
Government Employers May Not Refuse to Hire You
Like the prohibitions against termination and discrimination, a government employer cannot refuse to hire you, or any person associated with you, solely because you have filed for bankruptcy, you had been insolvent before receiving a discharge in bankruptcy, or you have not paid a debt that is dischargeable in your bankruptcy or has been discharged in bankruptcy.
Private Employers May Refuse to Hire You
In contrast, there is no similar restriction for private employers. Private employers do have the right to deny you employment based on your bankruptcy filing.
Many private employers require credit or background checks prior to hiring. Your bankruptcy will likely show up in these reports and a private employer can refuse to hire you because you have filed for bankruptcy, even if that is the only reason they are refusing to hire you.
And you may not be protected during an employment evaluation period. At least one appellate court has permitted a private employer to deny employment after a two-day paid evaluation period, solely because it found that the employee had previously filed for bankruptcy. In that case, the bankruptcy was discovered as a result of a background check authorized by the prospective employee.
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Failure To Take Financial Courses
Under all types of bankruptcy, you must complete a personal financial management course before your bankruptcy is filed and again during the case that must be completed before your bankruptcy is discharged. These are court-ordered courses and, like any court order, if you fail to comply, you can have your case dismissed.
Having your Chapter 7 bankruptcy denied can have serious consequences. You will become immediately liable for all your debts. In the case of fraud, the trustee may also be able to administer non-exempt assets, which means you could lose your property and still owe your debts.
It is critical that you are open and honest with your attorney throughout your bankruptcy process in order to avoid doing anything where your Chapter 7 bankruptcy could be denied.
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Do Employer Credit Checks Affect Your Credit
Employer credit checks count as soft pulls on your credit. Unlike a hard pull, a soft pull means it may show up on your credit report, but wont negatively impact your credit score. This is the same kind of inquiry that happens when youre pre-approved for a credit card or when youre getting quotes from insurance companies.
If you apply for five jobs and they all check your credit, that wont hurt your credit. This is important to note if youre about to buy a house or make a huge purchase and dont want to do anything to affect your credit.
Only the accountholder will be able to see a soft pull on a credit report, except for a few exceptions.
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If You Hold Professional Licenses
Your licensing board may require you to report bankruptcy. For example, those with a Financial Industry Regulatory Authority license are required to disclose bankruptcy on Form U4, including the circumstances, and provide it to their employer.
Some boards will also publish records of bankruptcy. For example, the Certified Financial Planner Board of Standards publishes the names of any certificant who has declared bankruptcy in the past five years and keeps it on the site for up to 10 years.
If you lose a license or certification as the result of a bankruptcy, you could be terminated or demoted. But again, a licensing board will typically consider the circumstances surrounding the case and will rarely suspend or revoke your license for bankruptcy alone. Always check with your boards rules, as well as your states rules, and consult with your attorney.
A Word On Fidelity Bonds
Itâs best to disclose your financial history during job interviews.
Even though fidelity bonds also fall under the category of license bonds, there are people who worry they wonât get the bond and will be denied a job position. You should know that is illegal for any employer to discriminate against you, whether you are an employee or a job applicant, just because you have filed for bankruptcy.
There is a market for high-risk applicants for fidelity bonds, so you should be able to obtain the bond without too much hassle. If your criminal record is clean, this will further increase your chances of getting a bond.
The only exception might be if you are applying for some government positions, such as high positions at the U.S. Treasury, but these are very rare cases. Keep in mind that the bond requires you to disclose your financial history of up to 10 years to your potential employer, so your best policy will be to be honest as possible during the interview.
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How Will Bankruptcy Affect My Security Clearance
If you work for the government, having a security clearance may be a condition of your employment. If you are also having financial problems, you may have heard that filing bankruptcy would cause you to lose your security clearance. Faced with the possible loss of your job, you may have been hesitant to seek the relief you need. However, the truth is the mere act of filing bankruptcy does not lead to the automatic loss of security clearances in most cases.
Factors affecting security clearances
Generally, government agencies make security clearance decisions on a case-by-case basis. Some of the factors considered when deciding whether to issue or revoke a security clearance include:
Allegiance to the United States
Use of alcohol or drugs
Your handling of classified or confidential information
In general, if your lifes history contains evidence of untrustworthiness or unreliability, it can raise questions on whether you can be trusted to be responsible when working in a secure environment.
How bankruptcy can affect your security clearance
Conversely, filing bankruptcy for certain lesser reasons can cause problems for your security clearance. Such reasons may include filing bankruptcy because of:
Frivolous or irresponsible spending
What To Do If Your Rights Have Been Violated
Its not uncommon for an employer to violate the law when reviewing an individual’s credit report. Some major employers have been fined in recent years for violating state and federal laws.
If you think the employer has violated the Fair Credit Reporting Act during this process, you can report them to your state or local government if they have specific laws pertaining to employer credit checks. Otherwise, you can report them to the Consumer Financial Protection Bureau and the Federal Trade Commission .
The consumer can report to the FTC or the CFPB, but those agencies dont take action on behalf of individuals, said consumer attorney Jay S. Fleischman, consumer attorney at Shaev & Fleischman, P.C. For someone to get a resolution of the problem, theyd want to hire a lawyer.
Hiring a lawyer can be expensive, but if you know multiple people who have been violated by the same company, you can consider hiring a lawyer together.
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Does Bankruptcy Affect Future Or Current Employment
You might be hesitant to file for bankruptcy because youre afraid you might lose your job. Maybe youre concerned that a potential employer will deny your employment if you filed for Chapter 7 or Chapter 13 bankruptcy. If you cant meet your financial demands with a job, how would you meet them without one?
How Does Bankruptcy Affect Your Job Search
About 25% of employers conduct an employment credit check on applicants for some positions, while 6% check candidates credit regardless of the position, according to a 2020 nationwide survey conducted by the National Association of Professional Background Screeners and HR.com.
Jobs with financial responsibilities, or those in government or management positions, may be more likely to check your credit because employees may be expected to handle sensitive information.
Whether youre an applicant or a current employee, the FCRA requires employers to get your written permission before checking your credit. If they decline to hire you or take adverse action against you as an employee because of negative information in your credit report, they have to notify you and provide you a copy of the report they used to make the decision.
The best way to prevent a prospective employer from discovering your bankruptcy is to avoid positions that require you to handle money or confidential information since theyre likely to require a credit check.
If you cant avoid an employment credit check, be honest and provide any context you can to show that your financial problems wont interfere with your job.
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A Background Check For A Job Is More Than Likely In Your Future Learn The Common Deal Breakers For Employers
A background check for employment is customary for many jobs.
You can swear on your dog and promise up and down that you’re a trustworthy person, but chances are, a potential employer isn’t going to take your word for it. A background check for employment will likely be done before they can officially welcome you aboard. A whopping 94% of businesses perform background checks on job candidates, according to the Professional Background Screening Association .
The good news: As a job seeker, you have some protections. Employers must receive written permission from you before running a background check, and if anything in the reports leads to the company deciding against hiring you, the employer is required to inform you and provide you with a copy of the report.
What Kind Of Professional Jobs Are Affected By Bankruptcy
Filing bankruptcy is a difficult decision, but its sometimes the best or only option. The repercussions of filing for bankruptcy can follow you for 10 years the length of time the information stays on your credit report, and could potentially affect employment after bankruptcy. Many employers check credit reports for new hires and when promoting from within, and certain jobs are more likely to be affected by a bankruptcy than others.
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How Employers Find Out About Bankruptcy Filings
In practice, employers rarely find out about a Chapter 7 bankruptcy filing. However, if a creditor has sued you, obtained a judgment, and started garnishing your wages, your employer will get the news. The bankruptcy will stop the wage garnishment, and your employer will be notified about it. In such a situation, your employer already knew you were having financial problems and will probably welcome the bankruptcy as a way for you to take affirmative steps to put your problems behind you.
If you file for Chapter 13 bankruptcy, your employer is likely to learn of your bankruptcy case. If you have a regular job with regular income, the bankruptcy judge may order your Chapter 13 payments to be automatically deducted from your wages and sent to the bankruptcy court. In effect, your employer will be pressed into service as a sort of collection agency, to make sure you honor your Chapter 13 plan.
Can Bankruptcy Stop Millennials From Seeking Better Employment Opportunities
Federal, state and local government agencies cannot consider your bankruptcy when deciding whether to hire you. However, private employers do not have the same constraints. In fact, private employers are likely to conduct a credit check and find out about your bankruptcy. How heavily the results of your credit check influence potential employers typically depends on the nature of the position.;
Those who are interested in positions that handle money are more likely to have a difficult time finding employment in their field post-bankruptcy. For example, your bankruptcy may prohibit your employment in companies hiring for positions in banks, bookkeeping, payroll, and accounting.
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Cani Be Denied A Job Based On A Bankruptcy And Judgmentnoted On My Credit Report
Recently denied a job based on bankruptcy and judgment on credit report. Specifically asked about bankruptcy details: I can present his case to my supervisor but first Im going to need a current statement to confirm the current balance of the bankruptcy and history of payments from Of the criminal background and credit check the following was all that was mentioned: CREDIT: Civil Judgment Entered 2/2009 $9,000; Ch. 13 Bankruptcy entered 3/2009 $390,993. Decision was: We have reviewed your application and regret we are unable to appoint you. Can they do that? Isnt there protection for discriminatory treatment?
Asked on October 1, 2010 under Employment Labor Law, Texas
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No Bankruptcy Discrimination In Government Issued Licenses
Under the law, no governmental unit may deny, revoke, suspend, or refuse to renew a license of a person who has filed for bankruptcy because:
- the person filed for bankruptcy
- was insolvent before the bankruptcy discharge, or
- has not paid a debt that has been discharged or will be discharged in a pending bankruptcy.
Similar to the protection for employment actions, the licensing protection extends to people who are associated with someone who has filed for bankruptcy.
This is important if you have a job which requires you to maintain a professional license. However, there are a few very limited exceptions relating to the agriculture industry.
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