Texas residents who find themselves facing unmanageable financial situations are sometimes hesitant to file for bankruptcy because they worry about the impact that it could have on their credit ratings. Credit scores were once used almost exclusively by lenders to evaluate mortgage, personal loan, and credit card applicants, but credit checks are now also run by employers and landlords to screen job candidates and prospective renters. A study conducted in Sweden revealed that individuals who filed for bankruptcy found it more difficult to secure employment, and similar research has now been conducted in the United States.
To determine how a bankruptcy affected job prospects, researchers from the Yale School of Management, Harvard Kennedy School, and the University of Chicago looked at the employment histories of individuals who filed Chapter 7 and Chapter 13 personal bankruptcy petitions using information from the Social Security Administration and Equifax. The research team then checked the data to find out if filers found it easier to secure employment after their bankruptcies were discharged.
They discovered that an open bankruptcy had virtually no impact on finding a job. They also noticed that individuals who file for bankruptcy are no more likely to be laid off or fired. The researchers hope that the study, which will be published in the Journal of Finance, can help policy experts and lawmakers tasked with drafting employment discrimination legislation make more informed decisions.
Attorneys with debt relief experience may discuss these issues during initial client consultations, and they could point out that filing a bankruptcy sometimes causes credit scores to later increase. Individuals who file for bankruptcy make lower monthly payments because their debts are discharged or consolidated into Chapter 13 payment plans, which improves their debt ratios. Attorneys could also use initial consultations to dispel the many misunderstandings and myths surrounding bankruptcy and explain the differences between Chapter 7 and Chapter 13 petitions and alternatives like debt settlement.