It goes without saying that a bankruptcy proceeding is not confidential. Many bankruptcies will remain on your credit report for ten years. Because they are a public record event, anyone can search and find the information.
However, what is a great relief for consumers is that bankruptcy does not have to be disclosed unless explicitly required. That means when applying for credit, employment or security clearance.
There is no need to shy away from communicating important information about your financial health to your future spouse. Marrying someone who has filed for bankruptcy won't affect your record (or vice versa), and it doesn't mix your credit report with theirs.
We will discuss some of the major disclosure issues.
How long does the bankruptcy stay on the credit report?
We have seen many Chapter 7 bankruptcy success stories, but they still remain on your credit report for ten years after your filing date. A Chapter 13 bankruptcy is erased after seven years, as debtors have generally resolved a large portion of their debt by that stage.
As long as the bankruptcy information remains on file, anyone can check your credit and monitor it. This means that employers or credit providers can find out your bankruptcy on background checks simply by looking at your credit report.
Military security clearances
If you decide to enroll in the military, you will typically have to disclose prior bankruptcies as part of the application process. Depending on the exact branch of the military you are applying to, a credit check is sometimes required. Since each branch of the military has its own eligibility rules, it's a good idea to contact a military recruiter for more information on the implications of bankruptcy on your eligibility for service.
When bankruptcy is involved, security clearance issues are unlikely to arise. However, security clearance determinations are decided on a case-by-case basis. Before filing, contact the appropriate department or military personnel to discuss any issues that may threaten your security clearance or have a detrimental effect on your military career. For further guidance, we advise you to refer to Special Rules for the Military.
Disclosure of bankruptcy to your employer.
It is not necessary to make a proactive effort to inform your current employer of the fact that you filed for bankruptcy in the past. Remember, however, that your bankruptcy filing is public, so your employer may discover it through a public records search or credit check.
Disclosure when applying for credit or a job
When applying for a new job, you may be asked to disclose information about past bankruptcies. Sometimes the credit check is one of several background checks the company performs. If you are asked about past bankruptcies, you must be truthful and disclose them. After all, any dishonesty discovered in your application may cause the employer to discharge or reject you.
Similarly, if you are applying for new credit, you should address any questions about past bankruptcies clearly and truthfully. In most cases, the lender will also want to run a credit check before lending you funds. If you intentionally mislead on the credit application, this will constitute fraud and could land you in trouble or legal action in the future.
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