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Past Bankruptcy Can Haunt Your Job Hunt

If you’ve declared bankruptcy in the past, be prepared to defend that decision to a potential employer. It’s illegal for an employer not to hire or promote you because you filed bankruptcy, but it’s sometimes OK to consider bad credit, which usually precedes bankruptcy.

Companies often check credit when a job involves finance, accounting, cash or valuable merchandise and when a position requires a security clearance. “The one broad, overarching law in this area is the Fair Credit Reporting Act, and it doesn’t put much of a whammy on employers snooping around in people’s credit,” warns attorney Barbara Kate Repa, author of Your Rights in the Workplace.

Bad credit is more widespread than you’d suspect. Barry Nadell, a senior vice president of Kroll’s Nashville-based Background Screening division and author of Sleuthing 101: Background Checks and the Law, says about 42.4 percent of the credit checks his firm runs come back with bankruptcies, liens, judgments or accounts that went to collection.

Kroll recommends a credit check only when a job candidate will be working in a position that can affect the company financially. That’s sound advice in light of the fact that US Equal Employment Opportunity Commission (EEOC) officials have warned employers that unnecessary credit checks may disproportionately screen out African Americans and Hispanics.

First Warning

When a potential employer checks credit, you’ll be asked to sign a permission slip first, says Jennifer Brown Shaw, a partner at employment law firm Shaw Valenza LLP. “The most important thing is for the applicant to tell the truth,” she says. “They’re sure to be fired if they lie.”

If you’re told only that the company will do a “background” check, ask what that check includes and how the information will be used. To see what’s on your credit report, get a free copy.

If your credit is poor or you’ve filed bankruptcy, be ready to provide interviewers with a short, contrite explanation and to redirect the conversation to one of your strengths as well as to a reference who can back up your story. Shaw suggests something like this: “I’m not irresponsible. Here’s the reason for my poor credit — divorce, medical problems while uninsured, etc. I hope you’ll see what’s relevant is my ability to X, Y and Z. If you call my former employer, you’ll hear that I was an excellent….”