In this article, we’ll discuss the important topic of: “How does Bankruptcy affect your job and future credit?”
Will I get a job after Bankruptcy? Will I be eligible for credit in the future? The most common fears in the form of questions that often arise in anyone who decided on filing for Bankruptcy. The word bankruptcy is often considered shameful as it showcases your inability to pay back the debt irrespective of the circumstances.
The after-effects of filing bankruptcy can stay as long as ten years. However, Bankruptcy is ideally a second chance for the individuals, but indeed it comes with its negative impacts. In this article, we will discuss the employment opportunities and the chances of getting a credit/loan in the future, once the individual has filed for Bankruptcy.
How does Bankruptcy affect your job and future credit?
First, Bankruptcy can heavily affect your credit scores and remain in the report for years. As a result, it can be portrayed as a red flag for many creditors who would otherwise have lent you an amount.
However, your FICO (Fair Isaac Corporation) credit score is the determining factor of your credit; if yes, what should be the amount and at what interest rate. According to FICO, up to 35% credit score is your payment history. The debt you owe holds another 30% of your credit score. Bankruptcy discharge can help you to reduce this percentage. However, there are negative impacts too for filing Bankruptcy. Let us find out how.
Consequences of filing Bankruptcy
Let’s find out if there are any negative consequences on filing Bankruptcy.
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On Job, Applicants
There is a rule for federal, local, or state government wherein they cannot consider the Bankruptcy for appointing you. Whereas private firms are n0t bound by any such laws. However, people have shared their haunting experience from the past after they had filed a bankruptcy.
In jobs which involve accounting, financing and to deal with money, like bookkeeping, payroll, and accounting, etc., needs special attention and a bankruptcy case filed by a job applicant in these roles can cause trust issue.
In a few instances, when the employer decides to check on your credit scores and deny giving the consent, the employer may or may not hire you. All you can do at the moment is by being open and honest about the Bankruptcy, which may reduce the adverse effect.
Specific other jobs need a security clearance. For instance, if you are in the FBI, CIA, or part of the armed forces, or any other organization in partnership with the government, will need a security clearance.
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On future credit
Depending on what type of Bankruptcy you have filed results on how long the details will be available on your credit report. For instance, in the case of Chapter 7 and 11, the bankruptcy details are visible on your credit report for almost ten years from the time you file. Chapter 13 stays for nearly 7 years after discharge, but it can take another 3-4 years for the future proceedings to complete.
Many lenders often face a trust issue if you have a prior case of Bankruptcy, for apparent reasons. The timings are also crucial; for instance, if you filed a bankruptcy almost 7 years ago, your chances of getting credit are better than if you filed two years ago.
In such cases, we would recommend you go for a lender with whom you have a personal connection. You can back up by paying a higher percentage of interest across the amount. You will have to be consistent in your repayments, and with time, you will be able to build back a strong credit history.
How soon will my credit score improve after Bankruptcy?
It may seem a little intimidating right now to find ways to rebuild your credit scores. But it is possible. We have come across instances where within two years, the credit scores of individuals have reached 700.
So, the sooner you start making good financial choices, the faster your credit score improves. It will take patience, time, and absolute dedication. You can also convince a friend or family member who has a steady credit score to co-sign a loan application or credit card.
Final Thoughts
To summarize, Bankruptcy, to some extent, can affect your job, career, and your future credibility. But there are ways you can either avoid or overcome these challenges. We have mentioned the possible scenarios under which Bankruptcy can be a trouble. The main factor of trust needs to be regained in both scenarios. We hope this helped you find some answers.
Here are 2 different videos that will explain the topic of “How Does Bankruptcy Affect Your Job And Future Credit” in more detail.
Will Bankruptcy Affect My Employment?
Will Bankruptcy affect my credit score?
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