Job Searching After Bankruptcy
Unfortunately, bankruptcy has proved a necessary evil for many Americans during the recession. While no one wants to file for bankruptcy, an increasing number of individuals and families have found themselves with no other means of absolving their debts.
In fact, during the period between June 2008 and June 2010, Americans filed nearly 3.7 million petitions for personal bankruptcy; and year over year, bankruptcy filings rose by nearly a third from 2008 to 2009, according to the Administrative Office of U.S. Courts.
While bankruptcy is immediately helpful in restructuring personal finances, its long-lasting effects on an individual's credit history is one of the reasons it's still a last resort for those in financial crisis. Yet another big deterrent is the auxiliary effect personal bankruptcy has on future employment. A past bankruptcy can be a red flag to an employer, especially if the candidate is applying for a finance- or accounting-related position.
However, though bankruptcy is certainly not an asset to a job-seeker, it's not the nail in the coffin, either. If you've filed Chapter 7 or 13 bankruptcy in the past, here's what you need to know about its effect on your employment.
Know your rights.
Steven Mitchell Sack, author of 'The Employee Rights Handbook: Effective Legal Strategies to Protect Your Job from Interview to Pink Slip,' says that candidates who have filed for bankruptcy should know their rights before heading into an interview.
"It is difficult for a company to learn about your bankruptcy history unless you tell them," he says. "For example, it is illegal to be asked the following questions at the hiring interview: 'Do you have any credit problems?' 'Have you recently filed for bankruptcy?' 'Is your salary presently subject to attachment or wage garnishment?'"
Should you be asked one of the above questions in an interview, Sack advises that you politely decline to answer.
Though an employer can't come out and directly ask you for an intimate financial history during an interview, it is legal for companies to conduct credit checks -- which list bankruptcy filings -- on applicants, though. If a potential employer does want to conduct a credit check, they will need your written permission to do so, and you will often be presented with a document to sign during the initial application process.
Don't be afraid to exercise those rights.
If you feel that you were unfairly denied employment due to a bankruptcy, you may want to consider filing a complaint with the Equal Employment Opportunity Commission, which enforces employee-discrimination protections, including bankruptcy protections.
Despite the fact that it is illegal to disqualify a candidate because of a bankruptcy (exceptions may be made for those applying to highly-sensitive financial positions) some companies still find ways around the law. "It's illegal to discriminate against an applicant solely because of their bankruptcy," says Donna Ballman, a Florida-based employment attorney. "However, the courts have really allowed employers to get away with saying there were other reasons, so that doesn't necessarily mean employers won't hold it against applicants. Until the courts decide to interpret the law differently, or until Congress decides to take out the word 'solely,' bankruptcy will continue to be allowed to be held against job applicants."
A company probably won't check your credit.
In most states, it's perfectly legal for a company to check an applicant's credit history, but that doesn't mean they're going to do it. Unless the job description involves handling cash, payroll, finances, bookkeeping or accounting, many companies won't check your credit. According to a poll by the Society for Human Resource Management, only 13 percent of employers report that they check the credit of every job candidate.
The repercussions will vary.
If the company you're interviewing with does happen to be one of the 13 percent that conducts credit checks on everyone, it still doesn't mean you're doomed if your poor credit history is revealed.
According to the SHRM study, only 9 percent of employers said that one of the top qualities they look for in a job candidate is good credit. Additionally, 87 percent of HR managers said that even if they found a red flag on a candidate's credit report, they would give the person a chance to explain before disqualifying him or her.
If you are given the chance to explain yourself, remember to be honest -- but that doesn't mean you have to go into all of the details of the filing or what led up to it.
You can make up for it.
Even if your employer does find out about your bankruptcy, you can make up for it by being great in other areas. "If you believe that an adverse report will affect your prospects, I would recommend trying to offset that part of the application with some great recommendations," says Elizabeth Cohee, an attorney in California. "Prospective employers may overlook issues from your past if they feel that you are otherwise the right person for the position."