Having to declare bankruptcy is never an easy thing to do. It affects your credit, your ability to take out loans and may even impact your job search. Employers looking to hire you often run a background check that includes your credit history and exposes your bankruptcy. The good news is that bankruptcy doesn’t stay on your credit report forever.
What Is Bankruptcy?
If you find yourself in over your head with bills, credit card balances and other debt that you simply cannot pay, you have the option of filing for bankruptcy. Individuals can either file for:
- Chapter 13 or Chapter 11 bankruptcy: You must repay a portion of your owed debts using a repayment plan.
- Chapter 7 bankruptcy: You do not repay debt via a repayment plan, but some assets might be sold.
All types of bankruptcy show up on your credit report, flagging you as a risk when it comes to securing any new debt and, potentially, getting a job. A Chapter 13 bankruptcy stays on your credit report for seven years, and Chapter 7 and Chapter 11 stay on for 10 years. Filing for bankruptcy also causes your credit score to drop significantly. Because of this, bankruptcy is often a last-resort option for those needing to alleviate their debt burden.
Read More: How to Remove Bankruptcy After 7 Years
When Do I Need a Background Check?
Many employers, landlords and companies with which you want a financial relationship will complete a comprehensive background check on you before entering into that relationship. They want to ensure that you have been truthful on applications and are a low risk when it comes to making payments. They also want to gain insight into your past.
So, does bankruptcy show up on a background check? The answer is yes, depending on the type of background check being done. A background check can include:
- Criminal history screening.
- Credit history check, including credit rating and score, and payment history.
- Drug testing.
- Any negative public record filings, including bankruptcies and foreclosures.
- Pulling a credit report.
If the person doing the background check only searches criminal records and not your credit reports or public record filings, they will not see your bankruptcy. In that case, the answer to the question, "does bankruptcy show up on a background check" is no.
When Bankruptcy Shows Up on a Background Check
Even if a bankruptcy appears on a background check, that doesn’t necessarily mean you won’t get hired for a job or be able to rent the apartment you want. It doesn’t even mean that you can’t get a line of credit. It’s simply a hurdle, which you may be able to overcome with a little legwork, some honesty and some credit repair actions.
With potential employers or landlords, you can always explain what led to the bankruptcy. Maybe your child was hospitalized, and the medical bills were too high. Or, you were let go from your job during company-wide layoffs and can’t find a similar position in your city. There are many reasons why you might declare bankruptcy, not just because you have a bad shopping habit and racked up a lot of credit card debt. Many will understand if your life circumstances led to a bankruptcy that appears on your background check and enter into a relationship with you regardless.
When it comes to borrowing money, you may still be able to open lines of credit, but for a price. Often, opening new lines of credit after declaring bankruptcy means very high fees or interest rates. You may also have the option of opening a secured credit card with your existing bank or becoming a joint account holder with a family member to start rebuilding your credit.
If you must file for bankruptcy, know that even if the bankruptcy shows up on a background check, it doesn’t always mean that you can’t get the things you need.
Leslie Bloom earned a J.D. from U.C. Davis’ King Hall, with a focus on public interest law. She is a licensed attorney who has done advocacy work for children and women. She holds a B.S. in print journalism, and has more than 20 years of experience writing for a variety of print and online publications, including the Journal of Juvenile Law and Policy.