Bankruptcy Filings, Credit Checks Thwart Some Job Candidates

The day after Thanksgiving a series of stories in the Wall St. Journal throws cold light on the stresses caused by the weakened economy. Under the banner headline, “Rebuilding Lives After Bankruptcy,” the writers Sara Murray and Joe Light discuss how a surge in bankruptcy filings and credit checks run by prospective employers is taking a toll on many Americans who find themselves in financial distress.

Though it can provide some needed breathing space while a debtor regains his or her financial footing, [f]iling a bankruptcy petition — which lingers on a credit report up to 10 years — can make it more difficult to find a job or rent an apartment,” Murray and White report.

One example they cite is that of Tamara Ricks of Sunset, Utah, who was offered a billing position by the municipal water, sear and garbage department in nearby Washington Terrace, contingent on a credit charge. Ms. Ricks and her husband filed a Chapter 7 pettion in February 2010 after their ice-cream parlor failed and her husband’s construction work dried up. She disclosed the bankruptcy during her job interview. The interviewer said that would be a problem, and shortly afterward Ms. Ricks received a letter saying she had been turned down – with no reason stated.

Ms. Ricks is certain that the couple’s bankruptcy was to blame, and Washington Terrace’s treasurer, who also oversees human resources, all but confirmed that it was. It’s the city’s policy, she said, to require credit checks for employees who deal wth finances or consumer information. “It’s a way we protect our citizens,” she said.

General bankruptcy laws prohibit refusal of employment based on the fact that the candidate has filed for bankruptcy protection. That doesn’t mean such refusals don’t happen; it just means that the applicant may not be told straight up that this was the reason.

Compounding the outlook for job applicants who are in bankruptcy is the upsurge in the number of employers reported to have run credit checks. Sixty percent of employers surveyed run credit checks on at least some job candidates, according to a survey from the Society for Human Resource Management. One quarter of them said that bankruptcy could make them unlikely to extend a job offer.

The Fair Credit Reporting Act establishes rules for how employers and others requesting credit checks can use the information obtained.

Until we get sustained economic growth and consumers dig themselves out of the financial holes many find themselves in, however, bankruptcies will continue to be drag on job growth.

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