Bankruptcy is a legal action that many individuals take when they are unable to pay their bills. When individuals apply for a job, many factors can cause them to not be accepted, such as having a low credit score. However, employers cannot discriminate against employees who have a low credit score due to bankruptcy.
Bankruptcy law provides some protections to employees who have filed for bankruptcy. Employment cannot be denied to a job applicant on the grounds that the job applicant is in debt. Employment also cannot be terminated on the grounds that the employee has filed for bankruptcy, according to Employee Issues. Some businesses would like to discriminate on such grounds, since there is a social stigma that associates bankruptcy with irresponsibility. However, this is not permissible by law.
The bankrupt are also protected from federal employment discrimination because those who file for bankruptcy are even less likely to be able to pay off their debt when they have lost their job, according to Employee Issues.
Bankruptcy and Credit Score
Many employers can and will discriminate against employees based on their credit scores. Employees who have filed for bankruptcy will have a very negatively affected credit score. Those who file for bankruptcy will have this fact listed on their credit score for 10 years. The credit score is most adversely affected if the individual filing for bankruptcy does not have a steady source of income, which is a common case when someone is looking for a job, according to the Federal Trade Commission. Then, that individual usually has to file for Chapter 7 bankruptcy, which causes asset liquidation. This bankruptcy is required by law to be reported to the independent credit rating bureaus.
Job Applicant’s Rights To Credit Report
Before obtaining a background check, the federal employer must have permission from the applying employee. Then, if the credit score is low as a result of the bankruptcy, the employer must give that individual a copy of her consumer report and a copy of “Summary of Your Rights Under the Fair Credit Reporting Act,” according to the Federal Trade Commission. Then, the employer must give the employee the name, address and phone number of the consumer reporting agency where the information came from and must tell the employee that she can dispute this information.
If the employer finds that the applicant has a low credit score, he can refuse the applicant the job unless the applicant has received special protection under bankruptcy. Then, the employer must have another reason for denying the applicant, according to Employee Issues.