Are Personal Bankruptcies Public Record?

Everyone experiences financial problems at some point in their lives. Sometimes those problems can be resolved with hard work and strict budgeting. At other times the problems cannot be solved using traditional methods. Filing for bankruptcy may be the only option. 

It’s reasonable to wonder if bankruptcies are public record, since friends, family, and employers might find out. Past bankruptcies are findable, but there are protections and ways to limit your exposure.

Where Bankruptcy Records Show Up

Like all state and federal courts in the United States, a bankruptcy court’s records are public record. Anyone can read information on individual bankruptcies by going personally to the bankruptcy court.

Your bankruptcy file can also be viewed online from any computer by using a government website called PACER. This website requires a subscription to be able to view the records, so most of the general public will not have online access to your file.

Your bankruptcy file consists of every document that is filed with the bankruptcy court by you and creditors. All documents in your case are considered public records because the general public can read them without your permission. For a member of the public to find your record at the bankruptcy court or on PACER, they would need to use your name, social security number, or your bankruptcy case number. 

The process of filing bankruptcy is not difficult. After your consultation with an attorney, you will provide information about your income, expenses, debts, and assets for preparation of your petition and schedules. The petition is your request to file a bankruptcy case and lists personal information such as your name, address, and the last four digits of your social security number (bankruptcy law prohibits listing your full social security number in public records). The schedules contain all of your financial information, including everything you own, paycheck facts, your debts, and your creditors. Once those documents are completed and you have signed them, the petition and schedules are filed electronically with the bankruptcy court. 

Debt collection companies and creditors regularly search bankruptcy court records for filings using PACER, and they use the information to update your past due accounts. Credit reporting agencies use information from PACER to update credit reports.

Some bankruptcy courts may require that bankruptcy cases be printed in local newspapers.  This requirement is being used less as newspapers move from print to online versions.

How Long Does a Bankruptcy Stay On a Credit Report?

Bankruptcy filings are listed on credit reports from the three major national credit reporting agencies (Experian, TransUnion, and Equifax). Bankruptcy information reported by these agencies includes the date which you filed your case, whether your case is a Chapter 7 or Chapter 13, the name of the bankruptcy court in which your case was filed, and whether or not your case is active or closed.

A bankruptcy will not stay on your credit report forever.  A Chapter 7 stays on your credit report for ten years, while a Chapter 13 stays on your credit report for seven years.

However, your bankruptcy will remain on your credit report even after your case has been closed by the bankruptcy court. A bankruptcy filing being reported on your credit report will negatively impact your credit score. Over time your credit score will start increasing, even while the bankruptcy remains on your credit report.

The FCRA and Privacy Protections on Your Credit Report

The Federal Credit Reporting Act, Section 605 (also known as FCRA) is a federal law which sets the time limits on information that can be added to your credit report. Apart from Chapter 7 bankruptcies, credit information that is over 7 years old cannot be reported on your credit report by any creditor. Examples of debts allowed for up to 7 years include civil lawsuits, civil judgments, tax liens, and accounts that have been turned over to collection agencies.

Another benefit of FCRA is that it defines what can be done with your credit information by your creditors, people who want to loan money to you, or potential employers. There are many rights given to you by FCRA that help you present a positive credit history and maintain your credit score. Some of the most helpful rights are that you must be told the reasons for refusing to provide credit to you or declining to hire you for a job, the right to know what is on your credit report, the right to be advised of your credit score, and the right to be able to dispute inaccurate or unverifiable information.

How Long Does Bankruptcy Stay on a Background Check?

A background check generally involves a search of public records. Background checks have wider variations in how they are constructed, and fewer consumer protections, than credit reports do. Since a background check will likely show information about you that is in the public record, your bankruptcy will probably show up.

Some states have laws limiting the dates of information that background checks can display. Additionally, as background checks are broader than credit reports, they may be incomplete or lose older information over time.

Discharging and Hiding Bankruptcies

Unfortunately, you cannot prevent a bankruptcy from becoming a public record or being posted to your credit report. Still, most bankruptcies do not make the news. Unless someone specifically searches for your name in the public records, the bankruptcy will likely not be discovered. 

What Happens to Your Public Record if Your Business Files Bankruptcy?

There are no credit reports for businesses. If you own a corporation or limited liability company that files for bankruptcy, then the information will not show up on your personal credit report. However, the company bankruptcy will still be a public record, and you may be listed as an owner in court documents.

If you have a bankrupt small business in which you are personally responsible for all of the debts, the bankruptcy will appear on your personal credit report. This type of business is usually self-employment or a sole proprietorship that is not an LLC or corporation. 

How Bankruptcies Affect Employment

Bankruptcy and Your Current Job

Generally a current employer will not find out about your bankruptcy unless:

• you tell your employer;
• your employer receives a request from the Chapter 13 trustee for a wage deduction; or
• your employer receives a notice from the bankruptcy court to stop an ongoing wage garnishment.

Bankruptcy law prevents an employer from firing you simply because you filed a bankruptcy.  An employer also cannot demote you, reduce your pay, or take away your responsibilities for this reason. Bankruptcy law cannot prevent you from being fired for misconduct which would normally result in losing your job, such as absenteeism, dishonesty, or being unable to perform your job.

If your employer fires you for any reason related to the bankruptcy, you may file a lawsuit against your employer for discrimination.  You can be awarded back pay or be restored to your position.

Bankruptcy and Future Jobs

Even if you are protected at your current workplace, it’s reasonable to wonder what effect a bankruptcy will have on a potential job application. Federal and state governments are not allowed to discriminate for the filing of a bankruptcy. However, a private company may indeed base a hiring decision on your bankruptcy filing.

Many potential employers require a background check as part of the application process. The background check usually includes a criminal check, a review of public records, and a credit report. Credit reports will list your bankruptcy, so your potential employer will find out about your bankruptcy filing. Technically you must consent for a credit report to be pulled, although it may be hard to advance in the hiring process without giving this consent. You can suggest a limited background check that does not include credit reporting, or ask what the data is being used for.

Most employers will not decline an applicant due to a bankruptcy filing, but they do have the right to do so. Some employers will consider a bankruptcy filing important when the job requires the handling of money or honesty. Although a potential employer should not hold it against you for not consenting to a credit report, it may help to tell the employer about a bankruptcy so that there are no surprises.

Bankruptcy and Security Clearances

Any government employee or a member of the military will worry about the effect of a bankruptcy on a security clearance. Generally, a bankruptcy does not affect a security clearance. Since the bankruptcy deals with your outstanding debt by erasing it in a Chapter 7 or by a debt repayment plan under a Chapter 13, there is no reason for you to be blackmailed about your debt nor bribed to clear it. The filing of the bankruptcy may actually help you to maintain your security clearance, since the potential for these vulnerabilities no longer exists.

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