Consequences of Bankruptcies on Background Checks

Depending on your specific industry, added research may be necessary for relation to the nature of the job opening you’re hiring for. Screening applicants with credit checks? Know your protections in this procedure and ease your hiring stress with these tips below.

Bankruptcies

It is unlawful for a public employer to refuse employment to an applicant due to a bankruptcy. Federal law prohibits employers from discriminating against applicants in this way. However, private employers who deem credit history a relevant job-related criteria are permitted to deny employment based on a bankruptcy filing. The federal Fair Credit Reporting Act (FCRA) prohibits background check companies from reporting bankruptcies that occurred more than 10 years prior to the date of the background check.

How To Protect Your Company with the 3 Rs:

Request: Always obtain written consent from the applicant to run their credit report. Not only does this protect your company, but also enables the applicant to decide whether or not this information is data they would like to share. An applicant with known financial challenges may opt out of this process to protect their own privacy. If an applicant refuses consent to a reasonable request for information, you have the legal right to refuse employment.

Under the Fair Credit Reporting Act, or FCRA (15 U.S.C. §1681), employers must receive an employee’s written consent before seeking that employee’s credit report. If your company decides not to hire or promote someone based on information in the credit report, you must provide a copy of the report and let the applicant know of his or her right to challenge the report under the FCRA.

Relevancy: Is your request relevant? A credit check for an applicant who is a web analyst or communications manager does not seem to be. However, if you are hiring for a financial manger, accountant, bank teller/banker, etc. then your request for a credit report is relevant to those sensitive, money-handling positions.

Reasonable: Don’t over-scrutinize. Background checks are a necessary step in the employment process, but no applicant is without fault. Ask the right questions and perform the appropriate research necessary to qualify or disqualify an applicant. Combine the best mixture of background research without going overboard.

In continuing your hiring process, understand that many applicants are trying to make improvements in their lives. A great majority of Americans are experiencing tough financial challenges. Use your best judgment of character in these situations. Protect your company with a wise use of background screening. If you have questions about what screenings are appropriate for your current needs, contact us at or 800.800.3374.