With the impact of a recession and shrinking job market in 2020, many Americans lost income or savings and were forced to live on credit to get by. With high interest rates on unsecured debt, families in Indiana and elsewhere are still struggling to make minimum balances on medical or credit card debt and sometimes must choose between putting food on the table and paying the mortgage.
When someone makes the difficult decision to file for bankruptcy, they often worry about the stigma that comes with it, and fear what this may do to their reputation or future job opportunities. Indianapolis residents may want to find out more about what is involved with debt solutions that will get then back on track with their lives.
What can employers know about my credit history?
In 2020, an estimated 25% of employers conducted credit checks on applicants for certain job positions, and 6% checked the credit of prospective candidates for all positions. Although there are some professions, such as government and managerial positions or jobs with financial responsibilities, both the Fair Credit Reporting Act (FCRA) and the Bankruptcy Code limit how employers may act on credit screenings.
The FCRA requires current or prospective employers to get written permission from individuals before reviewing their credit. A current employee does not have to inform their employer that they have filed for bankruptcy. The only way the employer would know is if, in a Chapter 13 filing, the company received information concerning payments through payroll deductions. Some professions involving professional licenses or security clearances do require disclosure of a personal bankruptcy.
Bankruptcy filings do become a part of public record, however, meaning any employer can check court records to see if a current or prospective employee has filed. But acting on this information or discriminating against an individual based solely on this information is illegal.
What is personal bankruptcy?
Bankruptcy is a legal process that allows individuals to either default on debt or to manage the repayment of debt over time. People seeking debt relief file a petition through the Federal Bankruptcy Court, and they choose among two options:
- Chapter 7, also called liquidation or straight bankruptcy, which absolves the debtor of repayment of unsecured debt like credit card balances, personal loans, or medical debt, and requires a means test to determine eligibility.
- Chapter 13, in which a court-appointed trustee works with creditors to consolidate debt and restructure repayment plans to resolve most debt within three to five years.
Both bankruptcy options halt creditor harassment, eliminate the threat of wage garnishment, and can discharge some debt such as medical debt that the filer is unable to repay.