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Will filing for Chapter 7 bankruptcy hurt job prospects?

On Behalf of | Oct 14, 2016 | Chapter 7 Bankruptcy, Firm News

For years now, companies have run credit checks on job applicants in order to assess their susceptibility to embezzlement or theft. This knowledge can make many Florida residents hesitant to file for Chapter 7 bankruptcy because they fear that it will hurt their employment prospects. Fortunately, most employers do not put significant weight on an applicant’s credit score.

Economists from two universities, the Social Security Administration and the Federal Reserve Bank of New York conducted a study to determine if credit scores had an impact on whether an individual would be offered employment by a company that runs credit checks on applicants. The study revealed that credit histories had only a minimal impact on the job market. Researchers compared the impact of a bankruptcy on an individual’s job prospects before and after the bankruptcy appeared on his or her credit reports. No evidence was found that the existence of a bankruptcy had a significant impact.

The appearance of a bankruptcy on a credit report does affect an individual’s ability to obtain credit, however. Interest rates are often higher for those with lower credit scores and it might be more of a challenge to obtain a mortgage. However, for many people, not filing could be worse. Over time, obtaining credit could become easier as the impact of the bankruptcy diminishes.

Florida residents who are unable to pay their debts will watch their credit scores continue to plummet over time. Filing for Chapter 7 bankruptcy could stop any further damage to their credit histories since negative reporting on the debts that are discharged will no longer happen. From there, filers have the opportunity to rebuild their credit and their financial lives.

Source: CBS News, “Some good news for job seekers with bad credit“, Aimee Picchi, Oct. 12, 2016

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