If you’re weighing the pros and cons of filing for bankruptcy to get out from under your debt, one of the questions you may have is whether having a bankruptcy on your credit report will harm your chances of getting a job. That’s a valid question to ask since part of getting back on track financially likely involves having a steady income.
A bankruptcy typically remains on your credit report for seven years if you use Chapter 13 and ten years for Chapter 7. Remember, though, that if a potential employer were to check your credit record now or in the near future, they wouldn’t see a pretty picture. Credit scores generally improve after a bankruptcy filing.
How does the law protect you?
The law offers some privacy protections. For example, under federal law, employers typically must get a person’s consent before accessing their credit record. Further, under Illinois’ Employee Credit Privacy Act ECPA), most employers can’t use people’s credit records as a basis for hiring or other personnel decisions.
There are exceptions for some lines of work, including banking, law enforcement and insurance. However, employers in these industries still need consent to check a person’s credit. If you were to apply for any job that requires a security clearance, for example, you can expect a number of background checks, including one on your credit. Many people actually file bankruptcy to secure their security clearance. Delinquent debts are more damaging to your credit than a bankruptcy.
You may need to have an explanation prepared
A poor credit record with no bankruptcy can be more difficult to explain to potential employers than one with a bankruptcy. Bankruptcy shows that you took a big step to repair your financial problems and start fresh.
Depending on what kind of jobs you seek in the upcoming years, you may need to be prepared to explain that you got into some financial problems (due to medical bills, unemployment, inexperience managing your budget or whatever the case may be). However, it’s important to emphasize the positive – that you chose to file for bankruptcy to get back on track, and you’ve learned a great deal in the process.
Don’t let unfounded fears prevent you from filing for bankruptcy. Find out more about the process and other options for dealing with your debt.